How will an increase in aggregate demand most likely affect the economy in the long run? Because output is above full-employment level of output, unemployment is below the natural rate of unemployment. The nominal wage will be pushed upward thus increasing the cost of production and aggregate supply decreases. Real GDP returns to full employment and the price level decrease. Because output is below full-employment level of output, unemployment is above the natural rate of unemployment. The nominal wage will be pushed downwards thus reducing the cost of production and aggregate supply increases. Real GDP returns to full employment and the price level increase. Because output is above full-employment level of output, unemployment is below the natural rate of unemployment. The nominal wage will be pushed upward thus increasing the cost of production and aggregate supply decreases. Real GDP returns to full employment and the price level increases Because output is above full-employment level of output, unemployment is below the natural rate of unemployment. The nominal wage will be pushed downwards thus reducing the cost of production and aggregate supply increases. Real GDP returns to full employment and the price level decreases.

Long-run macroeconomic equilibrium occurs when the aggregate demand curve the short-run aggregate supply curve, and they the long-run supply curve. A) is flatter than; intersect at a point to the right of B) intersects; intersect at a point to the right of C) is steeper than; intersect at a point to the left of D) intersects; intersect at a point on

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Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, the aggregate supply curve is vertical in the diagram because:     A)  nominal wages and other input prices are assumed to be fixed.   B)  real output level Qf is the potential level of output.   C)  price level increases produce perfectly offsetting changes in nominal wages and other input prices.   D)  higher than expected rates of actual inflation reduce real output only temporarily.

Which only affects short run aggregate supply? Choose all that apply. Group of answer choices Inflationary expectations Input prices Saving Technology Number of resources

Start at full-employment (FE) equilibrium with flexible wages and worker misperception of price level changes in the short run. Suppose then that we have an increase in Aggregate Demand. First, think about the short-run effects on price level (P), output level (Q), wage level (W), employment (L), and unemployment (U)?             In the long run, once workers realize that there was a change in the price level, they will change the supply curve of labor. When all subsequent wage and price adjustments take place, we will be in a new long-run equilibrium. From the original full-employment (FE) equilibrium to the final one, what is the net change in the price level (P), output level (Q), the nominal wage (W), employment (L), unemployment rate (U), and the real wage (W/P)?   Group of answer choices a) An increase in P, no change in Q, no change in W, an increase in L, an increase in U and no change in W/P. b) An increase in P, a decrease in Q, a decrease in W, a decrease in L, an…

Is there a connection between the concepts of Long Run Aggregate Supply and the Natural Rate of Unemployment? Describe precisely how you think an economy would move towards long run equilibrium over time.

If membership falls in labor unions and unions become less popular, then: production costs will increase, SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level. production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level. production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level. production costs will fall, there will be a downward movement along SRAS, equilibrium GDP will increase and aggregate price level will fall.

The real wealth effect explains why the aggregate supply curve is horizontal in the long run. Select one: True     False

FILL IN THE BLANKS    Inflation measures the changes in the level of               in the economy. Demand-pull inflation is caused by a                shift in the aggregate demand curve, while cost-push inflation is caused by a              shift of the aggregate supply curve. When the price level is increasing by an extremely high rate, the economy is said to be experiencing                .  Stagflation occurs when the economy is experiencing high inflation, high unemployment, and low                    at the same time. To combat inflation, the government can use contractionary monetary policy which will also lead to                  interest rates. Note, however, that there is a short-run tradeoff between inflation and                 as illustrated by the Philips Curve. Inflation is stable when the unemployment rate is equal to the                     rate of unemployment.