A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of:
a. cyclical unemployment
b. real unemployment
c. aggregate demand
d. inflationary pressures
c. aggregate demand
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An exporter can hedge against the possible decline in a foreign currency by purchasing
A) put options on the currency. B) call options on the currency. C) the currency on the spot market. D) currency on forward contracts.
Bobby faces two choices. The first is to receive $600 on the spot. The other choice is to receive $800 a year from now. The interest rate is 5% per year. What could a possible explanation for Bobby choosing to receive $600 on the spot?
A) Bobby finds that the present value of the $800 a year from now is less than $600. B) Bobby may have time-inconsistent preferences. C) Although Bobby chooses $600 on the spot, he is actually indifferent between the two options. D) None of the above is correct.