Explain how the aggregate demand and aggregate supply model can be made more dynamic
What will be an ideal response?
We can make the aggregate demand and aggregate supply model dynamic rather than static by making three changes to the basic model. First, potential real GDP increases continually because the long-run aggregate supply curve continually shifts to the right. This is because workers are continually entering the labor force, technological change occurs, and the economy accumulates machinery and tools. Second, aggregate demand increases during most years. This is because population and income increases over time. Finally, the short-run aggregate supply curve shifts to the right, except for periods of time when workers and firms expect high rates of inflation.
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In an oligopoly, there are
A) many firms and barriers to entry. B) many firms and no barriers to entry. C) few firms and barriers to entry. D) few firms and no barriers to entry. E) barriers to entry and only one firm.
The marginal revenue curve of a perfectly competitive firm
A) has a vertical intercept equal to exactly one-half of the vertical intercept for the demand curve. B) lies below the demand curve and above the average revenue curve. C) intersects the average revenue curve from above at the maximum point of the average revenue curve. D) is also the demand curve faced by the firm.