Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?
What will be an ideal response?
The long-run effects differ from the short-run effects of an increase in aggregate demand because the long-run and the short-run aggregate supply curves differ. With a vertical LRAS, changes in AD only affect the price level, not real GDP. With an upward sloping SRAS, changes in AD impact both the price level and real GDP.
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If China has an absolute advantage over Canada in producing both rice and tires, then
a. China should produce both rice and tire and Canada should produce both rice and tires b. there are no benefits possible to China from specialization c. Canada should produce tires and China should produce rice d. China should produce tires and Canada should produce rice e. more information is needed to tell whether China or Canada should specialize
In the long run
A. all inputs are variable. B. all intermediate goods are fixed. C. only capital inputs are fixed. D. all inputs are fixed.