4) For each outcome below, tell what type of shift must have taken place in either the aggregatedemand curve or the long-run aggregate supply curve.(a) In the short run, the price level is unchanged and output rises.(b) In the long run, the price level declines and output is unchanged.(c) In the long run, the price level rises and output decline.

The objective of the question is to determine the type of shift in the aggregate demand curve or the…

Answered: 4) For each outcome below, tell what…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 16
A9
(a) Suppose the natural rate of unemployment for the economy is 5 percent and the economy is currently experiencing an 8 percent unemployment rate. Explain what will likely happen to wages and prices as the economy adjusts to the long-run equilibrium. (b) Using the information below, explain the adjustments that will be taken by firms and workers to move the economy to a long-run equilibrium, specifically in terms of costs of production, real and nominal wages, and prices of products. Assume that firms and workers have adaptive expectations. The current unemployment rate = 4%. The natural rate of unemployment = 5%. Last year's inflation rate = 2%. This year's inflation rate = 3%. (c) The workers in the oil and gas industry in Alberta are paid an average of $68.50 per hour, and through their collective bargaining agreement, they have incorporated a 3.5 percent annual raise in their contracts to account for anticipated inflation. Suppose there is unexpected inflation of 2.8%…
Which of the following is likely to occur if an increase in legal immigrants significantly reduces the wages of workers, ceteris paribus? A. Aggregate supply will decrease (shift left). B. Aggregate supply will increase (shift right). C. Aggregate demand will increase (shift right). D. Aggregate demand will decrease (shift left).
A vertical long-run aggregate supply curve shows that:(a) wages and prices are sticky.(b) changes in technology do not affect the productive capacity of the economy.(c) the availability of resources does not affect the productive capacity of the economy.(d) changes in the price level do not affect the full employment productive capacity of the economy
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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?…
34) Unemployment would increase and prices would decrease if aggregate demand shifted left aggregate demand shifted right aggregate supply shifted left aggregate supply shifted right
Question 3: Consider an economy that is in equilibrium with output equal to Y *. There is then a significant reduction in the world's demand for this country's goods. (a) Illustrate the initial equilibrium in a diagram. (b) (b) What kind of shock occurred -aggregate demand or aggregate supply? Show the effect of the shock in your diagram. (c) (c) Explain the process by which the economy will adjust back toward Y in the long run. Show this in your diagram. (d) (d) Explain why policy makers may want to use a fiscal expansion to restore output back to Y * rather than wait for the process you described in part (c). What role does downward wage stickiness play in the policy- maker's thinking? | *
24. If the short-run aggregate supply increases by less than the long-run aggregate supply, then, at the short-run equilibrium, A) GDP will be below potential GDP. B) aggregate demand will increase. C) GDP will be above potential GDP. D) GDP will be equal to the potential GDP 25. A negative supply shock in the short run causes A) the aggregate supply curve shifts to the left. B) the price level to fall. C) unemployment to fall. D) equilibrium real GDP to rise.
*Only D&E *
43. Which of the following variables does NOT cause business cycles, according to classical economics? (A) Technological growth. (B) Immigration. (C) Capital accumulation. (D) Money supply. 44. Suppose that there is a sudden fall in consumption. What happens to the economy in the long-run? (A) A fall in output and a fall in prices. (B) A rise in prices. (C) A rise in output. (D) A fall in prices but not in output.

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