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Questions and Answers
What is the effect of further increasing production in an economy close to its full capacity limit?
What is the effect of further increasing production in an economy close to its full capacity limit?
- Stabilizes the general price level
- Leads to a significant change in production
- Causes higher prices without a significant change in production (correct)
- Results in lower prices
In an economy operating at point B on the aggregate supply curve, what happens when an expansionary policy is implemented?
In an economy operating at point B on the aggregate supply curve, what happens when an expansionary policy is implemented?
- Results in no change in either production or prices
- Creates a large increase in production and a small increase in prices
- Leads to a small increase in production and a larger increase in prices (correct)
- Causes a decrease in both production and prices
When implementing an economic policy to reduce inflation from 5% to 2%, what is the targeted impact on aggregate demand?
When implementing an economic policy to reduce inflation from 5% to 2%, what is the targeted impact on aggregate demand?
- No effect on aggregate demand
- Increase aggregate demand (correct)
- Create stability in aggregate demand
- Decrease aggregate demand
What was the view of many economists about inflation thirty years ago?
What was the view of many economists about inflation thirty years ago?
Why is it important to consider the state of the economy before implementing an economic policy?
Why is it important to consider the state of the economy before implementing an economic policy?
What happens to the equilibrium level of income when an expansionary policy is applied at point B on the aggregate supply curve?
What happens to the equilibrium level of income when an expansionary policy is applied at point B on the aggregate supply curve?
What is the effect of an expansionary policy when the economy is operating in the horizontal part of the AS curve?
What is the effect of an expansionary policy when the economy is operating in the horizontal part of the AS curve?
What happens to the equilibrium price level when shifting the AD curve to the right under an expansionary policy?
What happens to the equilibrium price level when shifting the AD curve to the right under an expansionary policy?
Which factor is prioritized in the horizontal part of the AS curve when implementing an expansionary policy?
Which factor is prioritized in the horizontal part of the AS curve when implementing an expansionary policy?
What is the key consideration when determining the impact of economic policies on the economy based on the AS curve?
What is the key consideration when determining the impact of economic policies on the economy based on the AS curve?
What is the primary reason for having two main points of consideration regarding the AS curve when analyzing economic effects?
What is the primary reason for having two main points of consideration regarding the AS curve when analyzing economic effects?
In which direction does an expansionary policy shift the AD curve?
In which direction does an expansionary policy shift the AD curve?
According to Keynesian economists, what is the shape of the short-run aggregate supply curve at low levels of production?
According to Keynesian economists, what is the shape of the short-run aggregate supply curve at low levels of production?
Why do Keynesian economists argue that firms are more likely to increase output rather than prices in response to rising demand at low levels of production?
Why do Keynesian economists argue that firms are more likely to increase output rather than prices in response to rising demand at low levels of production?
What type of unemployment is associated with the low levels of production described in the text?
What type of unemployment is associated with the low levels of production described in the text?
What happens to the shape of the short-run aggregate supply curve as the economy moves from underemployment to full employment?
What happens to the shape of the short-run aggregate supply curve as the economy moves from underemployment to full employment?
What is the primary factor that shapes the short-run aggregate supply curve, according to the text?
What is the primary factor that shapes the short-run aggregate supply curve, according to the text?
What type of economic policy is mentioned in the text as a way to increase aggregate demand?
What type of economic policy is mentioned in the text as a way to increase aggregate demand?
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