Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?
What will be an ideal response?
The long-run effects differ from the short-run effects of an increase in aggregate demand because the long-run and the short-run aggregate supply curves differ. With a vertical LRAS, changes in AD only affect the price level, not real GDP. With an upward sloping SRAS, changes in AD impact both the price level and real GDP.
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Positive economic analysis _____
a. evaluates policy changes and determines whether it is a good idea b. seeks to understand the outcome of a policy change c. cannot be proven incorrect d. is a statement about "what ought to be"
Embargoes are more likely to be effective when
A. a small county imposes an embargo on a large country. B. the embargo is sudden and comprehensive when first imposed. C. the demand for imports by the target country is relatively elastic. D. the supply curve of the embargoing country is highly inelastic.