Asked by Trang Nguyen on Jul 07, 2024
Verified
What do most economists believe concerning the relation between the price level and real output?
Price Level
A measure of the average prices of goods and services in an economy at a specific time, indicating the cost of living or inflation rate.
Real Output
The total quantity of goods and services produced in an economy, adjusted for price changes or inflation, indicating the true growth in an economy’s production.
- Gain an understanding of the interaction between aggregate demand and supply curves and their contribution to equilibrium in various time frames.
Verified Answer
BM
brenda mancillaJul 13, 2024
Final Answer :
Most economists believe that in the long run, real variables are not affected by nominal variables. So, for example, changes in the money supply do not change real variables in the long run. However, most economists believe that nominal variables do change real variables in the short run. In the short-run prices and wages may be fixed based on the expected price level. If the actual price level differs from the expected price level, real variables are affected.
Learning Objectives
- Gain an understanding of the interaction between aggregate demand and supply curves and their contribution to equilibrium in various time frames.