Which of the Following Is NOT a Limitation of the Aggregate

question 45

Multiple Choice

Which of the following is NOT a limitation of the aggregate demand-inflation adjustment model?

• A) LRAS is a thick line or band,not a thin vertical line.
• B) LRAS bends backward at both very high and very low rates of inflation.
• C) Potential output is not fixed.
• D) Bank of Canada responses are more complex than illustrated in this model.
• E) Firms do not change prices in response to output gaps.

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