Answer to Question #312643 in Microeconomics for Natalie

Question

TRUE/FALSE

1. Suppose that aggregate demand increases starting from an equilibrium income level. this implies up upwards pressure on the average consumption levels and output that increases. Since the standard of living of employees decreases owing to the higher prices, that employees will start to negotiate higher nominal wages. this is it called a short-run demand adjustment process
2. The interaction between AS and AD over the long run is more complex.It entails that over a period of time the adjustments (shifts) that are set in motion tend to lead the country and more specifically production and employment, to a cyclically stable or cyclically neutral level of “full” or saturated employment.
3. The value of the multiplier(K) depends on factors such as marginal propensity to save (MPS) the marginal propensity to import (MPX) and the marginal tax rate (MTR). The value of the multiplier is therefore in practice between the values of a 1 and 2

Answer 1

1. TRUE
2. TRUE
3. FALSE