If Strong Aggregate Demand Is Pushing the Economy Beyond Potential

question 222

Multiple Choice

If strong aggregate demand is pushing the economy beyond potential real GDP, which of the following must be true?

• A)The economy is at an equilibrium that is on the long-run aggregate supply curve.
• B)The economy is at an equilibrium that is on the long-run Phillips curve.
• C)The economy is at an equilibrium that is not on the long-run Phillips curve.
• D)Expansionary monetary policies will push the economy back to the long-run Phillips curve.
• E)The economy is at an equilibrium that is at the intersection of the short-run Phillips curve and the long-run Phillips curve.

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Definitions:

Homogeneous Oligopoly

An oligopoly in which firms produce a standardized product.

Homogeneous Oligopolists

Firms within an oligopolistic market selling products that are so similar that they are perfect substitutes for each other.

Pure Monopoly

A market structure where a single supplier provides a unique product or service without any close substitutes, giving it significant control over market prices.

Differentiated Products

Goods or services that are distinguished from similar offerings by unique characteristics, branding, quality, or performance, allowing companies to compete other than on price.