12. Starting from long-run equilibrium, wage rates and oil prices rise. What is the effect on the price level, Real GDP, and the unemployment rate in the short run? The price level rises, Real GDP falls, and the unemployment rate rises. The price level rises, Real GDP falls, and the unemployment rate falls. The price level rises, Real GDP rises, and the unemployment rate falls. The price level rises, Real GDP rises, and the unemployment rate rises. O O

12. Starting from long-run equilibrium, wage rates and oil prices rise. What is the effect on the price level, Real GDP, and the unemployment rate in the short run? The price level rises, Real GDP falls, and the unemployment rate rises. The price level rises, Real GDP falls, and the unemployment rate falls. The price level rises, Real GDP rises, and the unemployment rate falls. The price level rises, Real GDP rises, and the unemployment rate rises. O O

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 34-3 PRICE LEVEL aaa" LRAS B Y, Y₂ QUANTITY OF OUTPUT SRAS. SRAS AD Refer to Figure 34-3. In Figure 34-3, point B represents a short-run equilibrium and a long-run equilibrium. short-run equilibrium, and Point A represents a long-run equilibrium. long-run equilibrium, and Point A represents a short-run equilibrium. long-run equilibrium, and Point C represents a short-run equilibrium.
2. Suppose incomes in Europe increase, causing an increase in demand for U.S.-produced goods and services that are exported to Europe. (a) Describe and illustrate the short-run effects on the price level, real GDP, and employment. 2 (b) Assuming government does not intervene to fix the problem, describe and illustrate the impact on the price level, real GDP, employment, and wages in the long-run. HINT: To answer this question, begin your answer with the graphs in your answer to part (a) (just duplicate your graples in the answer to (a)). Then add to these graphs the long-run effects. (e) Given the state of the economy in the short-run (answer to problem (a)), suggest a change in taxes to reverse the problem without waiting for convergence to long-run equilibrium. Illustrate the short-run impact of this policy on price level, real GDP, and employment. Compared to the original long-run equilibrium, what happened to the price level and real GDP as a consequence of your government policy?…
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22. When the aggregate demand curve and the short-run aggregate supply curve intersect, A) the long-run aggregate supply curve must also intersect at the same point. B) inflation must be increasing. C) structural and frictional unemployment equal zero. D) the economy is in short-run macroeconomic equilibrium. 23. Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run? A) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. B) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. C) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. D) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.
11. The short - run aggregate supply curve slopes upward. According to the sticky - wage theory of the short - run aggregate supply curve, if workers and firms expected prices to rise by 4 percent, but instead they rise by 2 percent, then a. employment falls and production rises. b. employment rises and production falls. c. both employment and production rise. d. both employment and production fall.
"Considering only aggregate supply curve, when output is greater than the natural level:" C) the unemployment rate is equal to the natural unemployment rate. B) the unemployment rate is greater than the natural unemployment rate. A) the price level is greater than the expected price level. D) the price level will be lower next period than this period. E) Price doesn't change next period
8. Economic fluctuations I 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 a sudden and severe contraction in the housing market reduces the value of homes and causes consumers to spend less. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the housing market slump. (2) 240 AS 200 AD 140 AS 120 80 AD 40 200 400 800 1000 1200 OUTPUT (BIlons of dollars) In the short run, the decrease in consumption spending associated with the housing market contraction causes the price level to * the price level people expected and the quantity of output to v the natural level of output. The housing market slump will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of…
8. Draw the macroeconomy in equilibrium (snowflake). What happens when aggregate demand increases? Show on graph. Label new short run equilibrium E2. What state is this economy in? a) Give an example of something that could have caused this. b) What happens to GDP and price level? c) In this scenario, what do we call the difference between actual GDP and potential GDP? d) What is the unemployment rate relative to the natural rate? e) How would the economy fix itself? This means market adjustments, not government intervention. Show on graph. Label new equilibrium E3. Briefly explain. US 1 1:3
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A short-run equilibrium above the potential output means that O the unemployment rate is lower than the natural rate, putting upward pressure on wages and prices O the unemployment rate is lower than the natural rate, putting downward pressure on wages and prices O the unemployment rate is higher than the natural rate, putting downward pressure on wages and prices the unemployment rate is higher than the natural rate, putting upward pressure on wages and prices
9. How will (a) an unexpected 3 percent fall in the price level in the goods and services market differ from (b) 1 percent inflation when 4 percent inflation had been expected? What impact would (a) and (b) have on the real price of resources, profit margins, output, and employment? Explain.
Use the figure to answer the following questions. Assume that the economy initially is operating at price level 120 and real output level $870. This output level is the economy's potential (full-employment) level of output. Next, suppose that the price level rises from 120 to 130. 160 AS, AS, 150 AS, 140 130 120 110 100 90 810 830 850 870 890 910 930 950 Real output (dollars) Activate Wi Price level