In the Graphs Below, Q_P Refers to the Economy's Potential

question 131

Multiple Choice

In the graphs below, Q_P refers to the economy's potential output level. Refer to the graphs above. Graph A is constructed on the basic assumption that:

• A) The price level is not flexible
• B) Nominal wages are unresponsive to price-level changes
• C) Real output is unresponsive to price-level changes
• D) Unemployment is unresponsive to price-level changes

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Definitions:

Larynx

The voice box; a structure in the throat containing the vocal cords, responsible for producing sound and protecting the airway during swallowing.

Cardiac Sphincter

A muscular valve located between the esophagus and the stomach, preventing acid reflux from the stomach back into the esophagus.

Pyloric Sphincter

Thickening of the circular layer of the gastric musculature encircling the junction between the stomach and duodenum; also called pylorus.

Hydrochloric Acid

A strong acid secreted by the stomach lining that helps in digestion by breaking down food and killing bacteria.