Of the Five Endogenous Variables in the Dynamic Model of Aggregate

question 8

Multiple Choice

Of the five endogenous variables in the dynamic model of aggregate demand and aggregate supply, which two real variables do not depend on monetary policy in long-run equilibrium?

• A)Y_t and π_t
• B)i_t and r_t
• C)E_tπ_{t + 1} and π_t
• D)Y_t and r_t

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Definitions:

Wage Incentive Plans

Various systems that link pay to performance on production jobs.

Restriction of Productivity

Any factor or practice that limits or hinders the efficiency and effectiveness of production processes, thereby reducing overall productivity.

Piece Rate

A payment method where employees are paid a fixed rate for each unit of production completed, rather than receiving a fixed salary.

Widgets

Generic term used for any hypothetical or generic product, often used in discussions or explanations about manufacturing or economics.