The short-run aggregate supply line is:
A. upward sloping.
B. downward sloping.
C. horizontal at the current rate of inflation.
D. vertical at the economy's potential output.
Answer: C
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Which of the following is correct?
a. Federal Reserve purchases of securities will increase the reserves available to commercial banks. b. Federal Reserve purchases of securities exert upward pressure on interest rates in the short run. c. The Federal Reserve System determines the ratio of currency held by the public to the money supply (M1). d. Federal Reserve purchases of securities will decrease the reserves available to commercial banks.
The price elasticity of demand shows
A) the relationship between market price and household income. B) the proportionate amount by which the quantity demanded changes in response to a proportionate change in price. C) the quantity demanded at a given price. D) the proportionate amount by which the price changes in response to a proportionate change in quantity demanded.