at E₁₁ In the figure at right, if the economy is in equilibrium at then A. the economy is underutilizing its resources. OB. the economy is producing above its potential long-run equilibrium at full employment. OC. the economy is in a period of high inflation. OD. there is an inflationary gap in the economy.

at E₁₁ In the figure at right, if the economy is in equilibrium at then A. the economy is underutilizing its resources. OB. the economy is producing above its potential long-run equilibrium at full employment. OC. the economy is in a period of high inflation. OD. there is an inflationary gap in the economy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

Suppose the economy is initially at K. Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium? Select one: a. Over time, the aggregate demand curve will shift to the right until long-run equilibrium is restored at J and the gap is closed. b. Rising unemployment puts pressure on nominal wages to fall. The SRAS curve shifts right to SRAS1 closing the gap at H. c. In response to rising prices, firms will increase production moving along SRAS2 until long- run equilibrium is restored at J and the gap is closed. d. Rising unemployment puts pressure on nominal wages to fall. Firms employ more workers moving along SRAS2 until long-run equilibrium is restored at J and the gap is closed.
Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run a. real GDP will rise and the price level might rise, fall, or stay the same. b. real GDP will fall 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 same.
E1
6
Solutions for c,d and e
Most economists reason that an economy adjusts to inflationary and recessionary gaps slowly because are fixed in the short run. Consumer preferences Тахes Wages Supplies of most of the inputs
What is the effect of an increase in the price level when the money wage rate remains unchanged? A. Aggregate supply increases. B. Potential GDP increases. C. The quantity of real GDP supplied increases. D. Resource prices increase by the same percentage as the increase in the price level.
Figure: Policy Alternatives Panel (a) Price level P₁ P₂ P₁ LRAS SRAS, AD₁ Y₁ YpY₂ Real GDP SRAS₂ A) an inflationary gap. B) a recessionary gap. C) no gap. D) long-run equilibrium. m Yes Predictions On Styles Ty Price level Page 4 P₁ Droon P₂ Voice Panel (b) LRAS * SRAS₁ Y₁ Yp Y₂ 11. (Figure: Policy Alternatives) In Panel (a), suppose that the initial equilibrium is at real GDP level Y₁ and price level P₂. At real GDP level Y₁ there is: AD₁ Real GDP 19 AD₂ 100%
Solve it correctly Q)Explain how the assumptions of the aggregate supply model are different in the long runvs the short run.
nd 2. Assume that the economy starts at medium run equilibrium. Now let the government increase taxes. Using AS and AD curves, show the impact on output and prices in the short run and the medium run.
Starting from the Short Run Equilibrium shown on your 1st diagram (2020), show graphicallyhow the Automatic Mechanism will move the economy to a new Long-Run Equilibrium. Label Explain the changes in your diagram. Be very specific. If you shift a curve, explain If you move along a curve, explain why. The answer is in the PPT.
Stagflation is the combination of--------. Select one: a. a recessionary gap and a falling price level b. no recessionary or expansionary gap, but a rising price level c. an expansionary gap and a falling price level d. a recessionary gap and a rising price level