The long-run aggregate supply curve is vertical at $10 trillion, but the short-run aggregate supply curve intersects the aggregate demand curve at $12 trillion. From this, we know that
A) the economy is operating below full capacity in the short run, and will have to adjust by hiring more workers, thus reducing unemployment.
B) the price level is too high. The only way long-run equilibrium can be restored is to lower the price level.
C) adjustments will have to occur so that the long-run aggregate supply equals $12 trillion.
D) adjustments will have to occur so that the short-run aggregate supply intersects the aggregate demand curve at $10 trillion.
D
You might also like to view...
Here is what we know about a household: wages $25,000, unemployment insurance benefits $3,000, dividend income $4,000, income tax $5,000. What is the contribution to GDP of this household following the expenditure approach?
A) $24,000 B) $25,000 C) $28,000 D) $29,000
If the Federal Reserve sells $10 million in government securities in the open market, with a 10 percent required reserve ratio on deposits, the maximum increase in deposits would be
a. -$50 million. b. -$100 million. c. $10 million. d. $100 million. e. none of the above