In the above figure, start with the economy in equilibrium at point A. Then an unanticipated reduction in aggregate demand triggers a shift from AD1 to AD2. In the short run, this would cause
A) the price level to move from P1 to P2, but real Gross Domestic Product (GDP) would stay at Y1.
B) the price level to fall from P1 to P2, real Gross Domestic Product (GDP) to fall from Y1 to Y2, and the rate of unemployment to increase.
C) the price level to fall by some amount less than P1 but greater than P2, and the rate of unemployment would decrease.
D) no change in either the price level or real Gross Domestic Product (GDP), but a decrease in unemployment.
B
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The required reserve ratio is the ratio of reserves to ________ required by banking regulations
A) deposits B) loans C) profits D) currency
Sally can make 8 cups of soup per hour or 20 crackers per hour. Harry can make 10 cups of soup per hour or 30 crackers per hour. Can Sally and Harry gain from trade? If so, what is the range of prices of crackers for soup at which they would both find trade advantageous?