How does an increase in the price level affect the aggregate quantity of goods and services demanded?
What will be an ideal response?
An increase in the price level decreases the aggregate quantity of goods and services demanded for three reasons. First, it decreases the buying power of money. As a result, people decrease their demand for goods and services. Second, it raises the real interest rate. The real interest rate rises because an increase in the price level increases the demand for money, which raises the nominal interest rate, which, in the short run, raises the real interest rate. When the real interest rate rises, people and businesses delay plans for investment and purchases of big-ticket items. Finally, an increase in the price level makes domestically produced goods and services more expensive relative to foreign-produced goods and services. As a result, people and firms buy more foreign produced and fewer domestically produced goods and services, which decreases the quantity demanded of domestically produced goods and services.
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U.S. labor productivity slowed during the 1970s because of
i. increasing government taxes and regulations on production. ii. the necessity to cope with energy price increases. iii. inflation, which shortened the horizon over which businesses made their borrowing plans. A) i only B) ii only C) iii only D) Both i and ii E) i, ii, and iii
Which of following job analysis methods can analyze the widest variety of jobs?
A. PAQ B. task inventories C. conventional job analysis D. analyst interviews