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Explain why the following statements are false.

a. “The aggregate-demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods.”

b. “The long-run aggregate-supply curve is vertical because economic forces do not affect long-run aggregate supply.”

c. “If firms adjusted their prices every day, then the short-run aggregate-supply curve would be horizontal.”

d. “Whenever the economy enters a recession, its long-run aggregate supply curve shifts to the left.”

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Raushan Raj
Raushan RajLv8
19 Nov 2020
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Related questions

Explain whether each of the following statements is true or false, justifying your response.

The short-run aggregate supply (SAS) curve slopes upward because households spend more as their incomes increase.

The long-run aggregate supply curve can never shift.

Either a decrease in the nominal money supply by the Federal Reserve, all else held constant, or an increase in the price level, all else held constant, will shift the aggregate demand (AD) curve to the left.

The Keynesian portion of the short-run aggregate supply (SAS) curve would be relevant during a recessionary situation.

Stagflation occurs when the aggregate demand (AD) curve shifts out on the upward sloping portion of the short-run aggregate supply (SAS) curve.

Evaluate whether each of the following statements is true or false, and explain your answer:

a. The short-run aggregate supply (SAS) curve slopes upward because households spend more as their incomes increase.

b. The long-run aggregate supply curve can never shift.

c. either a decrease in the nominal money supply by the federal reserve, all else held constant or an increase in the price level, all else held constant, will shift the aggregate demand curve to the left.

d. the Keynesian portion of the short-run aggregate supply (SAS) curve would be relevant during a recessionary situation.

e. Stagflation occurs when the aggregate demand (AD) curve shifts out on the upward sloping portion of the short-run aggregate supply (SAS) curve.

1. If the price level doubles and the real output doesn't change, then nominal output also doubles.
2. Inflation makes it less difficult to interpret the information conveyed by prices.

3. Laissez-faire economists oppose government intervention in the market process.

4. Active demand management policies are based on the work of JohnMaynard Keynes.

5. In the AS/AD model, as the price level rises, the real value of assets increases, causing consumption to increase. This is one reason why the aggregate demand curve slopes down.

6. The short-run aggregate supply curve is upward sloping in part because increases in aggregate demand cause some firms to increase their price markups.

7. If productivity and wages both raises by 3 percent, then the short-run aggregate supply curve does not shift.

8. The long-run aggregate supply curve is vertical because all prices adjust in the long run.

9. If the economy is not in long-run equilibrium and other things are equal, then prices will eventually adjust to bring the economy to long-run equilibrium.

10. Most economists agree that it is possible for fiscal policy to fine-tune the economy.

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