Figure 27-6 -Refer to Figure 27-6. in the Dynamic Model of AD-AS

question 68

Multiple Choice

Figure 27-6
-Refer to Figure 27-6. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and no fiscal or monetary policy is pursued, then at point B

• A) the unemployment rate is very low.
• B) firms are operating at below capacity.
• C) the economy is below full employment.
• D) income and profits are falling.
• E) there is pressure on wages and prices to fall.

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Definitions:

Federal Trade Commission

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Predatory Pricing

A sales strategy involving setting prices unsustainably low with the intention to eliminate competition, deemed unethical and often illegal.

Sherman Act

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