The level of potential output is treated as a long-run aggregate supply:
A) because the long run is the time required for adjustment in wages and prices to their equilibrium values.
B) because it appears only once every 100 years.
C) because it reflects money illusion on the part of either households, business or government.
D) because the economy cannot operate at potential output in the short run.
Correct Answer:
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Q4: Potential output is determined by all the
Q5: Q6: Q7: In terms of the production function Y Q8: In terms of the production function Y Q10: A vertical line showing the economy's potential Q11: Which of the following statements is false? Q12: Assume that AE = 200 + 0.5Y Q13: Consider the following equations: AE = 200 Q14: Which of the following will not shift![]()
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A)
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