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Unlikely to cause a reduction in the price level because of menu costs and efficiency wages
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- Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending and thus aggregate demand should remain depressed for some time. In the long run, if the Fed does not respond, the change in price expectations created by the crisis shifts1)short-run aggregate supply left.2)aggregate demand right.3)aggregate demand left.4)short-run aggregate supply right.
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- A country does not consume all the goods it produces. There are no exports. Which term in calculating GDP using the expenditure approach accounts for this situation, if any?A) ConsumptionB) Gross InvestmentC) Government PurchasesD) This would not be accounted for without exports.