Refer to Figure 15-12. In the dynamic AD-AS model, if the economy ...

[chads108]

Refer to Figure 15-12. In the dynamic AD-AS model, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues no policy, then at point B
 
  A) there is pressure on wages and prices to fall.
  B) the unemployment rate is greater than the natural rate of unemployment.
  C) firms are producing above capacity.
  D) incomes and profits are falling.

Question 2

What is meant by fixed cost? What kinds of things might be included in fixed cost?
 
  What will be an ideal response?

[debra928]

Answer to Question 1

C

Answer to Question 2

Fixed cost is any cost that does not depend on the firm's level of output. These costs are incurred even if the firm is producing nothing. Examples would include payments on a long-term lease, insurance premiums, and contract obligations for some workers.

[chads108]

Excellent

[ricroger]

TYSM