Under the assumption of rational expectations, real GDP is determined by
A) the economy's aggregate demand curve.
B) the Fed.
C) a combination of monetary and fiscal policy.
D) the nation's long-run aggregate supply curve.
D. the nation's long-run aggregate supply curve.
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Any two of these events in questions 1 and 2 occur together? (Draw the diagrams!)
What will be an ideal response?
GDP tends to ________.
A. overstate economic welfare, because it does not include certain nonmarket activities such as the productive work of housewives B. understate economic welfare, because it does not take into account increases in leisure C. understate economic welfare, because it includes expenditures undertaken to offset or correct pollution D. overstate economic welfare, because it does not reflect improvements in product quality