Figure 17-6 -Refer to Figure 17-6.In the Dynamic Model of AD-AS in of AD-AS

question 8

Multiple Choice

Figure 17-6
-Refer to Figure 17-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

• A)there is pressure on wages and prices to rise.
• B)the unemployment rate is very,very low.
• C)firms are operating above their normal capacity.
• D)the economy is below full employment.
• E)incomes and profits are rising.

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Definitions:

Joseph Schumpeter

An Austrian political economist known for his theories on business cycles, economic development, and the concept of creative destruction.

Profit

The difference between total revenue and total cost.

Rent

Payment made by a tenant to a landlord for the use of a property, room, or apartment for a specified period.

Monopoly Profits

Extraordinary profits earned by a monopoly due to its unique position of having no competition, allowing for higher prices and lower production.