Spending on the war in Afghanistan is essentially categorized as government purchases. How do decreases in spending on the war in Afghanistan affect the aggregate demand curve?
A) They will shift the aggregate demand curve to the left.
B) They will shift the aggregate demand curve to the right.
C) They will move the economy up along a stationary aggregate demand curve.
D) They will move the economy down along a stationary aggregate demand curve.
A
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Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P1, in the long run the market
A) demand will increase. B) demand will decrease. C) supply will increase. D) supply will decrease.
According to rational expectations
A) expectations of inflation are viewed as being an average of past inflation rates. B) expectations of inflation are viewed as being an average of expected future inflation rates. C) expectations formation indicates that changes in expectations occur slowly over time as past data change. D) expectations will not differ from optimal forecasts using all available information.