Suppose the economy is initially in long-run equilibrium Then suppose there is an increase in military spending due to rising international tensions According to the model of aggregate demand and aggregate supply what happens to prices and output in the short run ?

Related Mcqs:

In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to ?

A. shift the short-run aggregate supply curve to the left B. shift the aggregate demand curve to the right C. shift the short-run aggregate supply curve to the right D. shift the aggregate demand curve to the left...

Which of the following statements is true regarding the long-run aggregate supply curve? The long-run aggregate supply cruve ?

A. Is vertical because an equal change in all prices and wages leaves output unaffected B. is positively sloped because price expectations and wages tend to be fixed is the long run C. shifts right when the government raises the minimum wage D. shifts left when the natural rate of unemployment falls...

The natural rate of output is the amount of real GDP produced ?

A. When the economy is at the natural rate of unemployment B. When the economy is at the natural rate of investment C. When the economy is at the natural rate of aggregate demand D. When there is no no unemployment...

According to the wealth effect aggregate demand slopes downward (negatively) because ?

A. lower prices increase the value of money holding and consumers spending increase B. lower prices decrease the value of money holding and consumers spending decrease C. lower prices reduce money holding increase lending, interest rates fall and investment spending increase D. lower prices increase money holding decrease lending, interest rates rise and investment spending … According to the wealth effect aggregate demand slopes downward (negatively) because ?Read More...

Suppose the price level falls but because of fixed nominal wage contracts the real wage rises and firms cut back on production This is a demonstration of the ?

A. sticky-wage theory of the short-run aggregate supply curve B. classical dichotomy theory of the short-run aggregate supply curve C. misperceptions theory of the short-run aggregate supply curve D. sticky-price theory of the short run aggregate supply curve...