Assume that the aggregate demand increases while the short-run aggregate supply decreases. The result is a(n):
a. increase in both equilibrium real GDP and the price level.
b. decrease in equilibrium real GDP and an increase in the price level.
c. decrease in both equilibrium real GDP and the price level.
d. decrease in equilibrium real GDP, while the price level remains fixed.
e. increase in the price level, while the change in equilibrium real GDP is ambiguous.
Question 2
Which of the following is a normative statement?
a. An increase in taxes will cause higher unemployment.
b. An increase in tariffs will increase the domestic prices paid by consumers.
c. Income should be redistributed from the top 2 of wage earners to the lower income brackets.
d. Running government budget deficits leads to higher market interest rates.
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