True/False (EXPLAIN if False)
a. The AD curve illustrates a negative relationship between the economy's price level and actual production (equilibrium Y).
b. If the FED observes the price level increasing in the economy, it will work to raise the market interest rate to slow down economic growth and prevent more inflation.
c. If the economy is on the horizontal (flat) part of the short-run AS curve, it is like being ON the PPF curve where all resources are being used.
d. The vertical part of the short-run AS curve represents the maximum GDP (or Y) the economy can produce at full employment.
e. Cost-push inflation happens when the short-run AS curve shifts to the right.