A recessionary gap exists when the macro economy is in equilibrium at less than the potential output of the the economy because aggregate demand is insufficient to fully employ all of society' s resources. In other words, the equilibrium (AD = AS) occurs to the left of the vertical long-run supply curve. At this point, potential output is reached ( full employment) and if any unemployment occurs, then it is due to structural or frictional; that is, the economy is at its natural rate of employment. True or falses

Q: Unemployment increasing from 5% to 9% during the year

A: Which of the following economic environments would most likely be associated with a recession?…

Q: Determinants of aggregate demand The following graph shows a decrease in aggregate demand (AD)…

A: The changes in the determinants that will lead to a fall in aggregate demand are:Consumer…

Q: According to the AS-AD model, which of the following is true about output when there is an increase…

A: "Macro-economic equilibrium is attained at a point where aggregate demand (AD) equates(intersects)…

Q: Suppose the full-employment level of real output ( Q) for a hypothetical economy is $250 and the…

A: a) When the price level rises from 100 to 125, at higher prices nominal wages are constant but…

Q: Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose…

A: Answer 1.  The SRAS curve can be divided into three zones: a horizontal Keynesian zone, a vertical…

Q: A long-run equilibrium occurs when aggregate demand and aggregate supply are in equilibrium ____ a)…

A: In the long run, the actual GDP of an economy and the associated price levels are determined by…

Q: Assume that the economy is initially in short-run macro-equilibrium.  If firms in the economy become…

A: Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded equals the…

Q: Which of the following would be most likely to produce a rightward shift in the long run aggregate…

A: Long run aggregate supply is vertical and it shows the output level when the economy is at its full…

Q: Use supply and demand graphs to illustrate the increase and subsequent decrease of lumber prices…

A: Suppose the market for lumber is in equilibrium as shown below, the equilibrium is maintained at…

Q: An Aggregate Expenditure model with AS = 2p + 20 – 2W and WO = 10, C = 26 + 0.8(Y – 20 – .25Y), -…

A: here we calculate the price level after the net export increases so this export create a shock in an…

Q: Y Supply equation is a pot + 80 (PP), where pot is the potential level of output. In 2016, the…

A: Tax Multiplier (TM): The tax multiplier represents the change in equilibrium real GDP resulting from…

Q: For a country, economists have estimated that structural unemployment is 2.0% and Frictional…

A: When the actual rate of unemployment is equal to natural rate of unemployment, the economy is at…

Q: Suppose that the economy's long-run output level is produced according to the following production…

A: Aggregate demand refers to the overall amount of locally produced commodities that are needed, such…

Q: A recession can be defined as:

A: A recession is a significant, widespread, and prolonged decline in economic activity. It is…

Q: The demand for Home output from foreign countries increased in an economy which was initially in the…

A: In an open economy, foreign consumers can make the demand for home output and the quantity sold to…

Q: Suppose an economy is at the short run equilibrium which its current output level called Y1, is…

A: The economy is at the short run equilibrium at income Y1 and the price level P1. At this point,…

Q: If an economy's short-run equilibrium output (ie, the output level associated with the Short Run…

A: Inflationary Gap: The inflationary gap arises when people have more money to buy the commodity or…

Q: Consider a closed economy, where wages are sticky in the short run. The consumption function is C =…

A: Aggregate supply means the total quantity of finished goods and services that all the producers are…

Q: Discuss about the three time horizons and what is the difference between the immediate short-run…

A: Three time horizons- Very Short time period- It is a time period when all factor of production are…

Q: When Full employment GDP is less than equilibrium GDP, the economy faces A) Recession B) Inflation…

A: Full employment refers to the economic situation where all the labor resources in the economy are…

Q: Short-run macroeconomic equilibrium is when (Hint: Be careful! Be sure to return to the general…

A: The short run macroeconomic equilibrium would result in a situation at which the quantity demanded…

Q: answer only question 3 pls

A: The long-run aggregate supply curve shows that the price level and total quantity of goods and…

Q: 60 60 65 70 75 80 85 90 95 100 OUTPUT Given the economic conditions depicted by the graph, answer…

A: In short-run (SR) the output, income levels are below the full employment level that is…

Q: Macropoland, a country that is a natural gas and oil importer, has a natural rate of unemployment…

A: Meaning of Inflation: The term inflation refers to the situation under which there is an excessive…

Q: Short-run fluctuations are all of the following EXCEPT a-sometimes called business cycle movements…

A: Short run fluctuations are not permanent.

Q: If aggregate demand (AD) decreases, then output will increase; return to the previous level remain…

A: The phrase "aggregate demand" refers to the overall demand for capital goods, consumer products, and…

Q: Full employment output is 100. We have AD = 200 -2P where P is the price level. Suppose that a…

A: The objective of the question is to determine the quantity produced in the short run immediately…

Q: by the following equations:                         Cd = 1,600 + 0.8(Y – T)…

A: Equilibrium condition:  Y= C+I+G+Xn

Q: Suppose firms become very optimistic about future business conditions and invest heavily in new…

A: (a) If firms are optimistic about future business conditions and invest in new capital equipment,…

Q: Based on research conducted by the Department of Economic Analysis, the government and policy…

A: Potential GDP is the GDP or output that a country produces when all of its available inputs and…