Equilibrium income is that level of income: A. the economy always produces. B. t
ID: 1098985 • Letter: E
Question
Equilibrium income is that level of income:
A. the economy always produces.
B. toward which the economy gravitates in the short-run.
C. an economy is capable of producing without generating accelerating inflation.
D. an economy is capable of producing without generating unemployment.
According to the Keynesian model:
wages are flexible because workers wouldn't otherwise be able to keep their jobs.
the price level is fixed due to social forces, which keeps an economy from remaining at
an equilibrium level of unemployment.
prices are subject to significant fluctuations as demand and supply change.
the government puts price controls on the economy, keeping the price level fixed
In the short run, deflation in asset prices
is the easiest way for expenditures and production to return to their normal levels.
is impossible because social forces keep prices from fluctuating in a market economy.
can create problems because borrowers would lose collateral and reduce
expenditures.
leads to expansions as an economy comes out of a recession by lowering the
unemployment rate.
If the dollar appreciates while foreign income rises:
A. the U.S. AD curve would likely shift to the left.
B. the U.S. AD curve would likely shift to the right.
C. the U.S. AD curve would likely remain unchanged.
D. what happens to the U.S. AD curve is unclear.
Explanation / Answer
Equilibrium income is that level of income:
A. the economy always produces.
B. toward which the economy gravitates in the short-run.
C. an economy is capable of producing without generating accelerating inflation.
D. an economy is capable of producing without generating unemployment.
According to the Keynesian model:
wages are flexible because workers wouldn't otherwise be able to keep their jobs.
the price level is fixed due to social forces, which keeps an economy from remaining at
an equilibrium level of unemployment.
prices are subject to significant fluctuations as demand and supply change.
the government puts price controls on the economy, keeping the price level fixed
In the short run, deflation in asset prices
is the easiest way for expenditures and production to return to their normal levels.
is impossible because social forces keep prices from fluctuating in a market economy.
can create problems because borrowers would lose collateral and reduce
expenditures.
leads to expansions as an economy comes out of a recession by lowering the
unemployment rate.
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