Under the classical model, workers and resources remain fully employed at the natural rate of real output following an aggregate demand change because ______.
a. downward wages and prices are sticky
b. inflationary gaps boost the potential output
c. prices, wages, and interest rates all adjust quickly
d. the economy quickly moves beyond its potential output
c. prices, wages, and interest rates all adjust quickly
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All of the following are reasons average workers in the United States today produce more than their counterparts a century ago EXCEPT that the modern worker:
A. is better educated. B. has more physical capital to work with. C. has better technology to work with. D. works longer hours.
Consider a consumer with a choice set that emerges from an exogenous income I. Suppose that, as a result of changes in a consumer's economic circumstances, the budget line rotates outward, with the vertical intercept remaining unchanged but the horizontal intercept shifting to the right. Demonstrate, using the budget line equation, how this could have happened if the price of the good on the horizontal axis did not change?
What will be an ideal response?