Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, the aggregate supply curve is vertical in the diagram because: A) nominal wages and other input prices are assumed to be fixed. B) real output level Qf is the potential level of output. C) price level increases produce perfectly offsetting changes in nominal wages and other input prices. D) higher than expected rates of actual inflation reduce real output only temporarily.

Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, the aggregate supply curve is vertical in the diagram because: A) nominal wages and other input prices are assumed to be fixed. B) real output level Qf is the potential level of output. C) price level increases produce perfectly offsetting changes in nominal wages and other input prices. D) higher than expected rates of actual inflation reduce real output only temporarily.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 18RQ: What is deflation?

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