A change in an input price will alter both production costs and the profit-maximizing output. Thus, a decline in the price of capital will reduce production costs, increase the profit- maximizing output, and thereby increase the demand for labor. This

If the economy is fully employed, which of the following is true?

A) The price level equals 100. B) Real and nominal GDP are equal. C) Real and potential GDP are equal. D) The unemployment rate is zero. E) Real GDP cannot increase.

In the aggregate production function, the symbol "A " represents an index of how efficiently the economy transforms capital and labor into real GDP. "A" measures the influence

A) of any factor that determines real GDP. B) of the quantities of capital and labor that determine real GDP. C) of any factor that determines real GDP other than the quantities of capital and labor. D) of the quantities of capital and labor that determine real GDP, holding other factors constant.