How does the aggregate supply curve differ from a supply curve for, say, bananas?
What will be an ideal response?
The supply curve for bananas indicates the quantities that producers are willing to sell at various prices. The aggregate supply curve indicates the rate of inflation that results from various levels of output, relative to potential output. When output is at potential, the rate of inflation is independent, so the long-run aggregate supply curve is vertical. When output varies from potential output, the tightening or slackening of labor and other input markets causes inflation to rise or fall. The supply curve for bananas reflects costs of production. The aggregate supply curve shows that deviations from potential output cause the cost of production and, thus, the price of output to vary.
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Suppose a bank has $300,000 in deposits, a reserve ratio of 5 percent, and bank reserves of $45,000. This bank can make new loans in the amount of
A) $345,000. B) $45,000. C) $30,000. D) $15,000.
Refer to Figure 21.2. If area A = 2,000, area B = 400, and area C = 2,600, what is the Gini coefficient for Urbania (rounded to two decimal places)?
A) 0.40 B) 0.43 C) 0.67 D) 0.77