The Keynesian portion of the short-run aggregate supply (SRAS) curve implies: a) an upward slope. b) a downward slope c) flexible prices and wages d) the price level does not change.
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7) The Keynesian portion of the short-run
a) an upward slope.
b) a downward slope
c) flexible prices and wages
d) the price level does not change.
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- (1) Suppose the economy is in long-run equilibrium. If there is a sharp increase in the expected price level, what do we expect to happen? Select one: (A) In the short run, the SRAS curve will shift left, real GDP and price will fall. (B) In the short run, SRAS will shift right, real GDP will rise and prices will fall. (C) In the short run, AD will shift left, real GDP and prices will fall. (D) In the short run, LRAS and SRAS will shift left, causing real GDP to fall.Assume an economy operates in the Keynesian (horizontal) range of its aggregate supply curve. For each of the following changes in conditions, state the direction of the effect on Aggregate demand, aggregate supply, price level and real GDP 1. A decrease in government expenditure in infrastructure 2. A severe recession occurs in a country, which has been a major importer 3. The federal government reduces business taxes 4.The central bank increases the cash interest rate.What effects would each of the following have on aggregate demand or aggregate supply? Justify your answer. In each case use a diagram to show the expected effects on the equilibrium price level and real output level in the economy. Assume that all other things remain constant and prices are inflexible downward. (a) A reduction in interest rates at each price level (b) A sizable increase in labor productivity. (c) The nation’s currency appreciates against its major trading partners .
- a) Derive the aggregate supply curve according to new Keynesians. What is the impact of a positive demand shock on national income and price level in S-R and L-R? (use diagrams) b)Which of the following would cause the aggregate supply curve to increase... A) Energy prices such as gas and electricity have increased rapidly throughout the country. B) The government has reduced its spending by more than 10% over the last 2 years C) Consumers are more confident and spending more than before. D) Throughout the economy, workers are using better equipment and output per hour is rising.If an economy is on the horizontal portion of the aggregate supply curve, then it is: A.)in a severe recession. B.)overheating. C.)at full employment. D.)experiencing inflation.
- 5) In the aggregate demand relation, a reduction in the price level causes output to increase because of its effect on: A) firms' markup over labour costs. B) the nominal wage. C) the interest rate. D) the expected price level. E) government spending.QUESTION 6 06. Which of the following statements about Keynesian policy are TRUE? Multiple answers a) Keynesian policy is most effective in the flat Keynesian (or Depression) range of the Short-Rum Aggregate Supply (AS) curve, where increases in Aggregate Demand are not likely to cause products price inflation. b) Keynesian policy is totally ineffective in the vertical Classical (past-full employment) range of the Short-Run Aggregate Supply (AS) curve, where an increase in Aggregate Demand will be completely dissipated by products price inflation. c) In the Intermediate range of the Short-Run Aggregate Supply (AS) curve, the effectiveness of Keynesian policy is partially dissipated by products price inflation. d) The Short-Run Aggregate Supply (AS) curve may will be vertical when the economy is trying to produce beyond full employment. But a vertical AS curve can also result from resource suppliers acting on inflationary expectations. This too will…Which of the following would cause the dynamic DAD curve to shift in (back)? A) a decrease in consumer confidence. B) a decrease in the inflation rate. C) an increase in consumer wealth. D) an increase in the short-run aggregate supply (SRAS) curve.
- 6) The short-run aggregate supply curve (AS) is upward sloping because: A) an increase in output causes an increase in employment, a reduction in unemployment, an increase in the nominal wage and an increase in the price level. B) a reduction in the aggregate price level causes a reduction in nominal money demand and a reduction in the interest rate. C) a reduction in the aggregate price level (P) will cause a reduction in the interest rate and an increase in output. D) an increase in the aggregate price level will cause an increase in the interest rate and a reduction in output. E) an increase in the nominal wage causes a reduction in the amount of output that firms are willing to produce.QUESTION 6 06. Which of the following statements about Keynesian policy are TRUE? a) Keynesian policy is most effective in the flat Keynesian (or Depression) range of the Short-Rum Aggregate Supply (AS) curve, where increases in Aggregate Demand are not likely to cause products price inflation. b) Keynesian policy is totally ineffective in the vertical Classical (past-full employment) range of the Short-Run Aggregate Supply (AS) curve, where an increase in Aggregate Demand will be completely dissipated by products price inflation. c) In the Intermediate range of the Short-Run Aggregate Supply (AS) curve, the effectiveness of Keynesian policy is partially dissipated by products price inflation. d) The Short-Run Aggregate Supply (AS) curve may will be vertical when the economy is trying to produce beyond full employment. But a vertical AS curve can also result from resource suppliers acting on inflationary expectations. This too will make Keynesian…Which of the following describes the use of Keynesian macroeconomic policy to resolve an inflationary gap problem in the economy? a) Unemployment, resulting from the short-run product markets equilibrium being below Long-run Aggregate Supply (LRAS), causes wages to decline, which increases short-run Aggregate Supply (AS), until long-run equilibrium is attained at full employment level of income and a lower price level. b) Government spending is increased, increasing Aggregate Demand (AD) to a level sufficient to attain long-run equilibrium at full employment level of income and a higher price level. c) In attempting to produce beyond the economy's natural level of GDP, producers bid up wages and prices of other resources, causing the short-run Aggregate Supply (AS) to decrease to the point where long-run equilibrium is restored. d) Taxes are increased reducing Aggregate Demand (AD) to a level consistent with full employment.