Refer to the graph below. Assume the economy is at the initial position of B2. An increase in aggregate demand with a corresponding adjustment in inflation expectations and wages will tend to:

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company’s hourly output varies with the number of workers hired, as shown in the table. Workers Pages/hour 0 0 1 40 2 75 3 105 4 125 5 140 6 150 7 155 If each page sells for $2 and the market wage is $15 per hour, then this firm will hire ______ workers per hour.

a. 4 b. 5 c. 6 d. 7

The basic assumption behind the J-curve effect is that

A) supply and demand for currencies are less elastic in the short run than in the long run. B) in the short run, supply will exceed demand; in the long run, they will be equal. C) an overshooting effect occurs as people adjust to the new information. D) investors tend to be overly cautious in currency instruments.