Minimum wage laws tend to make the price level more flexible rather than less fl

Question

Minimum wage laws tend to make the price level more flexible rather than less flexible. True False The quivalent of the aggregate supply curve in the aggregate expenditures model is the 45-degrees line. True False An increase in the price level reduces the real value of financial assets with fixed money values and, as a result, the holders of these assets decreases their spending. True False When there are unplanned increases in inventories, then actual investment ends up being less than planned investment. True False If households and firms in an economy would save all extra income that they receive so that MPC = 0, then the multiplier in that economy is zero. True False

Explanation / Answer

QUESTION - 1

False.

Minimum wage fixes the wage rate to a floor (minimum) price, making it less flexible.

QUESTION - 2

False.

The aggregate-supply equivalent cure is called the Aggregate expenditure (AE) curve.

QUESTION - 3

True

Higher price level decreases purchasing power of money.

QUESTION - 4

False.

Only when actual investment exceeds planned investment, there is unplanned inventory.

QUESTION - 5

False.

Multiplier = 1 / (1 - MPC) = 1 / (1 - 0) = 1 / 1 = 1.

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