Other things remaining unchanged, the flatter the aggregate supply curve:
a. the greater the expansionary effect of an increase in aggregate demand.
b. the smaller the inflationary effect of an increase in aggregate demand.
c. the greater the recessionary effect of a decrease in aggregate demand.
d. the greater the expansionary effect of a decrease in aggregate demand.
e. the smaller the recessionary effect of an increase in aggregate demand.
Question 2
An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to assemble a scholarly answer, the professor should take which steps?
a. Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts.
b. Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations.
c. Ask people in Alaska why they are not purchasing oil.
d. None of the above. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.
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