Answer the following statements true (T) or false (F)
1. The short run in macroeconomics is a period in which nominal wages remain fixed even as the general price level changes.
2. In the short run, output increases with the price level, but not in the long run.
3. The long run aggregate supply curve is upward-sloping because real wages eventually change by the same amount as changes in the price level.
4. In the long run, the economy will always move towards full employment.
5. In the short run, demand-pull inflation will drive up the price level and increase real output; but in the long run, only the price level will rise.
1. T
2. T
3. F
4. T
5. T
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Which took the major brunt of the decline in total demand in the Great Recession, real output or prices?
What will be an ideal response?
Refer to the given diagram and assumptions. If unemployment, rather than full employment, had initially existed in Alphania:
(1) The demand for labor in Alphania and Betania are as shown by D A and D B ,
respectively; (2) Alphania's native labor force is F and that of Betania is g; (3) wage L in Alphania is equal to wage m in Betania; and (4) full employment exists in both countries.
A. then Betania's loss of output would have been greater.
B. then Betania's gain of output would have been less.
C. its loss of output would have been less.
D. its loss of output would have been greater.