Consider the Basic AD/AS Macro Model in Long-Run Equilibrium

question 145

Multiple Choice

Consider the basic AD/AS macro model in long-run equilibrium.A permanent expansionary AD shock has ________ price-level effect in the short run and ________ price-level effect in the long run.

• A)a positive; no
• B)a negative; no
• C)a positive; an even larger
• D)a positive; a smaller
• E)a negative; a positive

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Definitions:

Cournot Equilibrium

A concept in economic theory where firms reach a state in which each firm chooses the optimal output level assuming the output levels of the other firms.

Duopoly

A market structure characterized by two producers/sellers in competition with each other.

Constant Costs

Costs that remain unchanged regardless of the level of output or activity within a certain range.

Corncob Pipes

Pipes made from the dried cob of a corn plant, often used for smoking tobacco.