Given a demand curve, explain how total revenue may be calculated.
What will be an ideal response?
A demand curve consists of the prices and corresponding quantities demanded at those prices. Total revenue is price times quantity demanded. Therefore, total revenue is the area of a rectangle formed under the demand curve by the choice of any price-quantity combination.
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Refer to the above figure. Unexpected contractionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run
A) the unemployment rate will be larger than the rate before the contractionary monetary policy. B) the unemployment rate will be smaller than the rate before the expansionary monetary policy. C) the unemployment rate will be the same rate as before the expansionary monetary policy. D) the unemployment rate can increase or decrease depending upon how much the LRAS will shift.
John Maynard Keynes believed that wages may be inflexible in the downward direction. Consequently, an economy
A) could get stuck in long-run equilibrium. B) could get stuck in a recessionary gap. C) could get stuck in an inflationary gap. D) would always produce more than Natural Real GDP. E) b and c