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Author Question: Suppose the current situation is such that the price level is 120, real GDP is 17 trillion, and GDP ... (Read 32 times)

clmills979

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on: Jun 29, 2018
Suppose the current situation is such that the price level is 120, real GDP is 17 trillion, and GDP along the long-run aggregate supply curve is 16.6 trillion. What will take place to restore the long-run equilibrium?
 
  A) The price level will fall until long-run aggregate supply increases to 17 trillion.
  B) The price level will fall and money wage rates will rise until real GDP along the long-run aggregate supply curve is 17 trillion.
  C) Money wage rates will rise until real GDP reaches 16.6 trillion.
  D) Aggregate demand will increase until both short-run and long-run aggregate supply equal 17 trillion.

Question 2

How does a tariff affect the government's revenue? How does an import quota affect the government's revenue?
 
  What will be an ideal response?


mfedorka

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Reply #1 on: Jun 29, 2018
Answer to Question 1

C

Answer to Question 2

A tariff is a tax on an imported good. Like all taxes, a tariff increases the government's revenue. However, an import quota is quantitative restriction on the amount of a good that can be imported. As such, an import quota has no effect on the government's revenue.


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