Refer to the graph shown. An effective price floor at $8 causes producer surplus to:

A deliberate change in the government's deficit

A) constitutes discretionary fiscal policy. B) leads to automatic stabilization. C) acts as a drag on the economy. D) is implemented by the Fed.

The real business cycle model begins with the assumption that ________

A) wages and prices are sticky B) wages and prices are completely flexible C) the velocity of money is a constant D) nominal variables are superior to real variables in describing economic activity