Assume the economy is currently in its long-run equilibrium and there is a decrease in money de-mand. In the AS-AD model, after the initial change in output, the adjustment to the new long runequilibrium is characterized byrising prices which decrease the real money supply and, thereby, decrease investment andoutput.(a)(b)falling prices which increase the real money supply and, thereby, increase investment andoutput.(c)falling interest rates that lead to higher money demand and falling output.falling price expectations that lead to lower sales and lower output.rising price expectations that lead to higher sales and higher output.(d)(e)

In the long run, in macroeconomics all the prices and wages are flexible. The AS curve is vertical…

mand. In the AS-AD model, after the initial change in output, the adjustment to the new long run equilibrium is characterized by rising prices which decrease the real money supply and, thereby, decrease investment and output. (b) (a) falling prices which increase the real money supply and, thereby, increase investment and output. falling interest rates that lead to higher money demand and falling output. falling price expectations that lead to lower sales and lower output. (c) (d) (e) rising price expectations that lead to higher sales and higher output.

mand. In the AS-AD model, after the initial change in output, the adjustment to the new long run equilibrium is characterized by rising prices which decrease the real money supply and, thereby, decrease investment and output. (b) (a) falling prices which increase the real money supply and, thereby, increase investment and output. falling interest rates that lead to higher money demand and falling output. falling price expectations that lead to lower sales and lower output. (c) (d) (e) rising price expectations that lead to higher sales and higher output.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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