If the Short-Run Aggregate Supply Curve Is Assumed to Be

question 9

Multiple Choice

If the short-run aggregate supply curve is assumed to be horizontal, international capital flows are infinitely elastic, and the nominal exchange rate is fixed, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?

• A)classical open economy
• B)IS-LM model
• C)Mundell-Fleming model with floating exchange rate
• D)Mundell-Fleming model with fixed exchange rate

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Definitions:

Positive Economic Profits

Profits that exceed the opportunity costs of a production enterprise, indicating a more favorable outcome than alternative investments.

Economic Losses

Occur when a company's total costs exceed its total revenues, indicating a negative outcome from business operations.

Representative Firm

A representative firm is a hypothetical entity in economic models used to represent the typical characteristics of firms within a particular industry or market.

Breaking Even

Breaking even refers to a financial situation where total costs and total revenues are equal, resulting in no net loss or gain for the business.