Assume that aggregate supply meets aggregate demand in the upward sloping portion of the AS curve. For each of the following, graph the change in aggregate supply and/or aggregate demand, and state the effect on prices and output. 1. The demand for U.S. exports increases. 2. Taxes increase. 3. Businesses become less optimistic about the future. 4. The labor force increases. 5. Costs of production
increase.
What will be an ideal response?
1. Aggregate demand increases; prices and output rise.
2. Aggregate demand decreases; prices and output fall.
3. Aggregate demand decreases; prices and output fall.
4. Aggregate supply increases (shifts rightward); prices fall and output rises.
5. Aggregate demand increases (shifts leftward); prices rise and output falls.
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When a firm links its employees' compensation to the performance of the firm, the firm is using
A) an incentive system. B) a command system. C) a cooperative system. D) an agency system.
Explain the Keynesian theory of money demand. What motives did Keynes think determined money demand? What are the two reasons why Keynes thought velocity could NOT be treated as a constant?
What will be an ideal response?