Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 16, Problem 2QP
To determine
The period in which the economy is in long-run equilibrium.
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Students have asked these similar questions
What would a Keynesian likely recommend in response to a recession? What would a neoclassical likely recommend? Why would a Keynesian policy response not make much sense in response to a minor recession like the one that occurred in 1990? What would be the cost of letting the economy adjust by itself to a new long run equilibrium?
In the Keynesian model (that is, the short run), what causes recessions?
The following graph shows the short-run and long-run aggregate supply curves (SRAS and LRAS) for an economy.
Suppose there is a technological improvement that allows firms to reduce their costs of production permanently.
Drag one or both of the curves on the graph to illustrate the long-term effects of this change. If you don't believe there will be any long-term effects,
leave the curves where they are.
240
LRAS
SRAS
200
SRAS
160
LRAS
120
80
40
6
12
18
24
REAL GDP (Trillions of dollars)
Assuming aggregate demand is not affected by the technological improvement, the long-run effect of this
v supply shock
is
v in aggregate output and
v in the price level.
PRICE LEVEL
Chapter 16 Solutions
Macroeconomics
Ch. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.3 - Prob. 1STCh. 16.3 - Prob. 2STCh. 16.3 - Prob. 3STCh. 16.5 - Prob. 1STCh. 16.5 - Prob. 2STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QP
Ch. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNGCh. 16 - Prob. 4WNGCh. 16 - Prob. 5WNG
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Similar questions
- Suppose England's economy is in long-run equilibrium. As a result of the coronavirus, the British government orders all non-essential businesses to close and issue “shutter in” and other “stay at home” directives requiring its citizens and residents not to leave their residences absent emergencies and/or to purchase food and groceries from markets (that is, people cannot, for example, go to restaurants, movies or sporting events and the like.) If so, then we would predict that in the short-run England's A. real GDP will fall and the price level might rise, fall, or stay the same. B. real GDP will rise 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 samearrow_forwardDoes the graph above reflect a Classical Model or a Keynesian Model? How do you know? What is happening in this economy in the short run?arrow_forwardor False: The economy is currently in short-run equilibrium.arrow_forward
- If the economy is operating in the neoclassical zone of the SRAS curve and aggregate demand falls, what is likely to happen to real GDP?arrow_forwardAssume that the United States economy is currently in a recession in a short-run equilibrium.arrow_forwardA technological improvement raises productivity. On the following graph indicate the short run and long run effects of this change on the economy, assuming policymakers take no action. In the short run, the price level blanks and output blank. In the long run, the price level will be blank and output will be blank compared to the initial equilibrium prior to the changearrow_forward
- Are all prices in the economy equally inflexible? Which ones show large amounts of short-run flexibility?arrow_forwardConsider the following graph. The economy is currently at point D. Which point will the economy go to in long run if consumer confidence increases?arrow_forwardSuppose the economy is operating at potential GDP when it experiences an increase in export demand. How might the economy increase production of exports to meet this demand, given that the economy is already at full employment?arrow_forward
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