Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run.
for example, an increase in the money supply, variable, will cause the price level, variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, variable. the notion that an increase in the quantity of money will impact the price level but not the output level is known as
in the short run, however, most economists believe that real and nominal variables are intertwined. economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. the following graph shows an incomplete short-run aggregate demand (ad) and aggregate supply (as) diagram—it needs appropriate labels for the axes and curves. you will identify some of the missing labels in the questions that follow.
the vertical axis of the aggregate demand and aggregate supply model measures the overall .
the curve shows the quantity of goods and services that firms produce and sell at each price level.

Kelso electric is debating between a leveraged and an unleveraged capital structure. the all equity capital structure would consist of 40,000 shares of stock. the debt and equity option would consist of 25,000 shares of stock plus $280,000 of debt with an interest rate of 7 percent. what is the break-even level of earnings before interest and taxes between these two options?

Krier industries has just completed its sales forecasts and its marketing department estimates that the company will sell 43,800 units during the upcoming year. in the past, management has maintained inventories of finished goods at approximately 3 months' sales. however, the estimated inventory at the start of the year of the budget period is only 7,300 units. sales occur evenly throughout the year. what is the estimated production level (units) for the first month of the upcoming budget year?

1. consider a two-firm industry. firm 1 (the incumbent) chooses a level of output qı. firm 2 (the potential entrant) observes qı and then chooses its level of output q2. the demand for the product is p 100 q, where q is the total output sold by the two firms which equals qi +q2. assume that the marginal cost of each firm is zero. a) find the subgame perfect equilibrium levels of qi and q2 keeping in mind that firm 1 chooses qi first and firm 2 observes qi and chooses its q2. find the profits of the two firms-n1 and t2- in the subgame perfect equilibrium. how do these numbers differ from the cournot equilibrium? b) for what level of qi would firm 2 be deterred from entering? would a rational firm 1 have an incentive to choose this level of qi? which entry condition does this market have: blockaded, deterred, or accommodated? now suppose that firm 2 has to incur a fixed cost of entry, f> 0. c) for what values of f will entry be blockaded? d) find out the entry deterring level of q, denoted by q1', a expression for firm l's profit, when entry is deterred, as a function of f. for what values of f would firm 1 use an entry deterring strategy?