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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Identify the correct definition of the federal funds rate
A) The federal funds rate is the interest rate at which the Fed lends money to households. B) The federal funds rate is the interest rate at which banks lend money to the Fed. C) The federal funds rate is the interest rate at which banks lend their deposits with the Fed to other banks. D) The federal funds rate is the interest rate at which the Fed lends money to business firms.
In the 1970s, the government placed price ceilings on gasoline prices. A shortage of gasoline occurred, and long lines formed at the pumps. Some gas stations required that in addition to paying the price on the pump you had to buy a blank will
The action of having to purchase the will in order to purchase gas is known as A) a surplus. B) a price support. C) the price system. D) a black market.