Figure 28.1 -Consider the Case in Which There Is an Increase in Increase

question 49

Essay

Figure 28.1
-Consider the case in which there is an increase in aggregate demand, and assume that firms in the economy are imperfectly competitive. The increase in aggregate demand shifts the demand curves facing individual firms out. If the firms' wages do not also increase, then firms can increase their profits by raising prices and increasing output. In other words, the response of the overall economy to the aggregate demand increase will be an increase in output and the price level-a positive slope of the short-run AS curve. What is the key assumption in this story that makes it work? Explain.

---

Definitions:

Proactive Interference

A phenomenon where older memories interfere with the recall of newer memories.

Old Girlfriend's Phone Number

A specific piece of personal information that may evoke memories or feelings related to a past romantic relationship.

Motivated Forgetting

A theoretical process in which individuals unconsciously or consciously block out painful, dangerous, or unwelcome memories.

WWII

The Second World War, a global conflict that lasted from 1939 to 1945 involving major world powers.