Increases in aggregate demand
A. lead to increases in real interest and unemployment rates if there is considerable excess capacity in the economy.
B. result only in inflation when the economy operates at its maximum productive capacity.
C. may be caused by ever-greater downward pressures on prices and wages if reserve requirements are raised.
D. may be caused by an increase in taxes.
E. increase both inflation and the unemployment rates.
B. result only in inflation when the economy operates at its maximum productive capacity.
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If the inflation rate in 2013 was 2.5 percent, and because of that people expect the inflation rate in 2014 will also be 2.5%, these people are said to have
A) rational expectations. B) expectations of stagflation. C) adaptive expectations. D) expectations of supply shocks.
Which of the following will result in a leftward shift of the market supply curve for labor?
a. an increase in immigration b. a decrease in labor productivity c. an increase in the working-age population d. an increase in nonwage income