Using the above figure, the perfectly competitive firm should shut down if the market price is below

Aggregate demand–aggregate supply analysis shows that in the long run the effect of increased aggregate spending on real GDP is:

a. negative. b. close to infinity. c. indeterminate. d. zero. e. positive.

In an economy where aggregate spending is given by Y = 3,000 + .75Y - 10,000 r, the central bank is currently setting the interest rate at 0.06 (6 percent). If potential output equals 9,500, the central bank must ________ the interest rate to close the ________ gap.

A. raise; expansionary B. lower; recessionary C. lower; expansionary D. raise; recessionary