Which will cause a larger short-run increase in prices: an anticipated or unanticipated increase in aggregate demand? Will they cause the same increase in prices in the long run?
An anticipated increase in aggregate demand will cause a higher short-run increase in prices. This is because an anticipated increase in aggregate demand causes the short-run aggregate supply to decrease due to expectations of higher future prices. In the long run, however, the increase in prices will be the same for both the anticipated and unanticipated increases in aggregate demand.
You might also like to view...
If currency outside of banks is $800 billion; traveler's checks are $10 billion; checkable deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000 billion; small time deposits are $1,000 billion; and money market
funds and other deposits are $800 billion, then M2 equals ________ billion. A) $7,310 B) $5,800 C) $710 D) $2,510 E) $1,510
If an industry currently has a Herfindahl index of 900 and a merger would raise that to 950, then the Department of Justice would generally
a. challenge the merger because the index would become too large b. challenge the merger because the change in the index is too large c. not challenge the merger because the postmerger index is less than 1,800 d. not challenge the merger if it is a horizontal merger e. challenge the merger if it is a vertical merger