Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 9, Problem 3CQ
To determine
Explain the reason why the short-run
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Why does the short-run aggregate supply curve slope upward to the right? If the prices of both (a) resources and (b) goods and services increased proportionally (by the same percentage), would business firms be willing to expand output? Why or why not?
Suppose that an economy wants to boost available labor hours in order to increase aggregate supply. What is the best way to accomplish this?
In the long-run, aggregate supply is a horizontal line at the long-run price level
people can afford.
True
False
One reason for why the aggregate demand curve slopes down is the wealth effect,
which means that a higher price level leads to lower real wealth and, thereby,
reduces the level of consumption.
True
False
Chapter 9 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- A production possibilities curve (PPC) represents the maximum amount of two goods or services produced by manufacturers in an economy. How are the PPC and long-run aggregate supply curve similar?arrow_forwardWhat impact would a change that shifts an economy's production possibilities curve outward have on the long run aggregate supply curve? How have improvements in computer technology affected production possibilities and the long run aggregate supply curve? Explain.arrow_forwardSuppose that the U.S. economy is at full employment when strong economic growth in Asia increases the demand for U.S.-produced goods and services. How the U.S. price level and real GDP will change in the short run?arrow_forward
- During a recession, couldn't firms reduce their labor costs by the same, or possibly more, if they laid off fewer workers while cutting wages? Why did few firms use this approach?arrow_forwardWhat kind of change would happen to aggregate demand, aggregate supply, and real GDP. if foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes.arrow_forwardWhen does macroeconomic equilibrium occur? Multiple Choice When exports equal imports. When the aggregate supply equals the long-run Aggregate Supply When the aggregate demand equals the long-run Aggregate Supply. When the aggregate quantity demanded is equal to the aggregate quantity supplied.arrow_forward
- If the price level rises and the money wage rate rises by the same percentage, what happens to the quantity of real GDP supplied? Along which aggregate supply curve does the economy move?arrow_forwardUsing the aggregate supply–aggregate demand model, explain how output and prices are determined. Will output vary or stay fixed in the long run? Suppose the aggregate demand curve were to remain fixed: What can we infer about the behavior of prices over time?arrow_forwardThe short-run quantity of output supplied by firms will exceed the natural level of output when the actual price level ———-that people expected.arrow_forward
- If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?arrow_forwardAssume that the long-run aggregate supply curve is vertical at Y = 3.000 while the short-run aggregate supply curve is horizontal at P=1.0, . The aggregate demand curve is Y = 2(M / P) and M = 1,500. a. If the is initially in long-run equilibrium, what are the values of P and Y? Draw the equilibrium using AD and short and long run AS curves.arrow_forwardAssume that the United States economy is currently in a recession in a short-run equilibrium. Draw a correctly labeled graph of aggregate demand and aggregate supply in the recession and show each of the following. The long-run equilibrium output, labeled Yfarrow_forward
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