Many economists maintain that
a. the aggregate supply curve is nearly horizontal at low levels of real GDP.
b. the aggregate supply curve is nearly vertical at very high levels of real GDP.
c. any change in aggregate demand will have most of its effect on output when economic activity is low but on prices when the economy is near full employment.
d. All of the above are correct.
d
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Refer to Figure 15-11. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues no policy, then at point B
A) incomes and profits are rising. B) the economy is below full employment. C) the unemployment rate is very, very low. D) there is pressure on wages and prices to rise. E) firms are operating above their normal capacity.
A measure of the way a quantity supplied reacts to a change in price:
a. subsidy b. supply schedule c. law of supply d. elasticity of supply e. excise tax