The Initial Aggregate Demand Curve Is AD₁ and the Initial

question 15

Multiple Choice

The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁.In the long run,the aggregate supply curve is vertical in the diagram because:

• A) nominal wages and other input prices are assumed to be fixed.
• B) real output level Q_f is the potential level of output.
• C) price level increases produce perfectly offsetting changes in nominal wages and other input prices.
• D) higher than expected rates of actual inflation reduce real output only temporarily.

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Definitions:

Complex Arithmetic

Mathematical operations that involve complex numbers, which are numbers that have both real and imaginary parts.

Fraction Notation

An equation that illustrates the act of one number being divided by another.

Exponential Notation

A mathematical way to write numbers using a base and an exponent, showing how many times the base is multiplied by itself.

Compound Interest

Interest computation on a loan or deposit that factors in the original principal along with the interest that has accrued in earlier cycles.