A short-run equilibrium above the potential output means that the unemployment rate is lower than the natural rate, putting upward pressure on wages and prices O the unemployment rate is lower than the natural rate, putting downward pressure on wages and prices O the unemployment rate is higher than the natural rate, putting downward pressure on wages and prices the unemployment rate is higher than the natural rate, putting upward pressure on wages and prices

A short-run equilibrium above the potential output means that the unemployment rate is lower than the natural rate, putting upward pressure on wages and prices O the unemployment rate is lower than the natural rate, putting downward pressure on wages and prices O the unemployment rate is higher than the natural rate, putting downward pressure on wages and prices the unemployment rate is higher than the natural rate, putting upward pressure on wages and prices

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 1.1P

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Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply Aggregate Demand Aggregate Supply Aggregate Demand Price Level Quantity of Output
9. Money Supply Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply Aggregate Demand Aggregate Supply Aggregate Demand Price Level Quantity of Output
What occurs in the labor market when the real wage rate is above the full-employment equilibrium level? When the real wage rate is above the full-employment equilibrium level, O A. the natural unemployment rate increases O B. unemployment benefits decrease C. the quantity of labor demanded increases O D. the natural unemployment rate decreases Click to select your answer.
An economy at a full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate O A. rises above; fall OB. falls below; rise OC. falls below; fall O D. rises above; rise its natural rate, and to return to the long-run equilibrium, the money wage rate begins to
Why does an inflationary output gap lead to increased price levels? O a. Demand is too high O b. Capital and labor are fixed in the short-run O C. Potential GDP is too low O d. The government increases price levels Supply is too low
The economy begins in a long-run equilibrium. Then something causes AD to decrease. What would result after this decrease in the short-run? O inflation and a recession O inflation and an expansion O deflation and a recession O deflation and an expansion
Assume that the economy begins in short-run equilibrium as shown in the graph below. Graph the effect on the equilibrium price level (PL) and real GDP (Y) if there is a decrease in aggregate demand (AD). Label the equilibrium price level and real GDP after the decrease in aggregate demand as PL2 and Y2. PRICE LEVEL PL₁ Real GDP LRAS The price level AD REAL GDP What happens to each of the following in the short run? The unemployment rate_ SRAS Real wages
On the following graph, AD, represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply curve. The economy's full-employment output is $12 trillion. PRICE LEVEL (CPI) 106 105 104 103 102 101 100 95 6 7 O AD 8 I AS AD Full Employment This is an example of 9 10 REAL GDP (Trillions of dollars) 12 13 14 15 The initial short-run equilibrium level of real GDP is As a result, the equilibrium level of real GDP will be AD₂ 16 Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to critics of Keynesian fiscal policy, which curve in the previous graph will most likely be the new aggregate demand curve? O AD₁ O AD₂ AD trillion, and the initial short-run equilibrium price level is trillion, and the equilibrium price level will be According to critics of Keynesian fiscal policy, which of the following is true in this case? O The…
1 At the new long-run equilibrium, A. real GDP and the unemployment rate will remain the same, but price level will be higher compared to the initial equilibrium, prior to the increase in exports. B. real GDP and the price level will be higher but the unemployment rate will remain the same compared to the initial equilibrium, prior to the increase in exports. C.real GDP, the unemployment rate and the price level all will remain the same compared to the initial equilibrium, prior to the increase in exports. D.real GDP and price level will be higher and the unemployment rate will be lower compared to the initial equilibrium, prior to the increase in exports
Suppose that a consulting firm has generated the following information about the economy of Growville: (i) The current employment in export industries is 50,000; (ii) The current total employment in the city is 150,000; (iii) Export employment is expected to grow by 10,000 jobs. a. Is there enough information to accurately predict the effect of the increase in export employment on total employment? b. If you have enough information, predict the employment effect and illustrate your answer with a graph. c. If there is insufficient information, proceed with the analysis as far as you can and list the additional information you need to complete the analysis. Illustrate your answer with a graph.
An increase in long-run aggregate supply can be expected to the natural rate of unemployment. have no effect on; increase O b. have no effect on; have no effect on C. decrease; have no effect on d. increase; have no effect on a. Oe. decrease; decrease Time left 0:07:34 the price level and
"Fracking" is a relatively new technology that allows drillers to extract significantly larger quantities of natural gas from existing deposits than was previously possible. How is this discovery likely to affect the economy? (Hint: Think about whether this will have a short-run or long-run effect.) This discovery will likely: O increase both SRAS and LRAS, leading to a long-term increase in output and decrease in prices. O increase AD but decrease both SRAS and LRAS, leading to an uncertain change in long- term output and a decrease in prices. decrease both SRAS and LRAS, leading to a long-term decrease in output and increase in prices. O increase AD, SRAS, and LRAS, leading to a long-term increase in output and an uncertain change in prices.