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

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

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 61P: Table 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you...

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Question 1• Consider a baseline short run equilibrium where output is 16 trillion dollars, and the price level is 20. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium.• Starting from the baseline, suppose COVID 19 hits this economy. Question 1 What happens in the short run to short run equilibrium price level and aggregate quantity & why? (Think about which curve shifts in which direction and why & where is the new short run equilibrium?)
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose firms become pessimistic about future business conditions and cut back on investment spending. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism. ? 240 AS PRICE LEVEL 200 160 120 80 40 F2 Ő F3 Ö+ F4 AD F5 0 F6 AD -D AS F7 F8 (9 F9 CI S F10 O: F11 F12 Fn Lock Inser
6. Suppose political turmoil causes a significant decrease in oil production in the middle east. How will real GDP, employment, and the general price level be affected in the short run? 7. How will the event described in question 6 affect real GDP, employment, and the general price level in the long run? Explain in words and a graph.
Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run a. real GDP will rise and the price level might rise, fall, or stay the same. b. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the same.
Assume that the economy starts at the natural level of output. Now suppose there is a permanent increase in the relative price of oil. a. Using the wage-setting and price-setting diagram (and explaining the intuition of the curves), show what happens to the unemployment rate in the medium run. Why does this happen? b. Assuming a simple production function, Y=N, where Y is output and N is employment, explain what happens to mediumrun equilibrium output. C. Assume the central bank has an inflation target. In an AS-AD diagram (explaining what lies behind the curves), show what happens to output and inflation in the short run and the medium run.
5. The U.S. conducts a great deal of trade with western European countries. Suppose western European countries suffer a severe recession. How would the European recession affect the general price level, real GDP and employment in the U.S. in the short run? In the long run? Explain in words and a graph.
Which of the following is true about Long Run Equilibrium? a. the economy is experiencing Long Run Inflation b. the economy is operating under some Frictional and Structural employment. c. the economy is operating with zero frictional or structural unemployment d. the economy is experiencing high unemployment
4Consider a baseline long run equilibrium where output is 22 trillion dollars, and the price level is 100. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium.Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant) A Keynesian Macroeconomist proposes the use of a massive expansionary fiscal policy. Step 1) What will be the shape of the Phillips Curve (Upward / Downward/ Vertical/Horizontal). I want you to think about what variable is measured on the horizontal axis of the Phillips Curve Graph and what variable is measured in the Phillips Curve Vertical axis. Then tell us what it means to say that Phillips Curve is upward or downward sloping or vertical or horizontal Step 2) why did this policy create a…
Suppose Canada's economy is in a long-run equilibrium with real GDP equal to potential output. Now suppose there is an increase in the Canadian-dollar price of all imported raw materials. In the short run, In the long run, A. real GDP and the price level both fall; real GDP is below its original level with a lower price level B. real GDP falls and the price level rises; real GDP and the price level return to their original levels C. real GDP and the price level both rise; real GDP is above its original level with a higher price level D. real GDP rises and the price level falls; real GDP returns to its original level with a lower price level E. real GDP and the price level both rise; real GDP returns to its original level with a higher price level
16. Why is the aggregate supply curve completely vertical in the long run? A. Short-run business cycles do not affect short-run output. B. Aggregate supply is impossible to illustrate in the long run. C. A country’s total output will always be constant. D. A country’s total output is not affected by price in the long run.
1) The natural rate of unemployment is the normal level of unemployment: •that exists without government intervention. •in an economy in the long run. •in an economy with a high labor force participation rate. •in an economy in the short run. 2) The normal level of unemployment that persists in an economy in the long run is: •the equilibrium rate of underemployment. •zero, as long as the market is equilibrium. •zero with effective public policy. •the natural rate of unemployment
. Suppose the economy is self-regulating, the price level is 132, the quantity demanded of Real GDP is 4 trillion, the quantity supplied of Real GDP in the short run is 3.9 trillion, and the quantity supplied of Real GDP in the long run is 4.3 trillion. Is the economy in short-run equilibrium? Will the price level in long-run equilibrium be greater than, less than, or equal to 132? Show the relevant graph and explain answers.