If the economy is self-regulating as Classical theory assumes,and it is in a recessionary gap, then how will it get back to full employment? Select one: a. wages and prices will rise. b. wages will rise, but prices will fall C. wages and prices will fall d. wages will fall, but prices will rise. e neither wages nor prices will change
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- If the economy goes into a recessionary gap, a.) How will the change in wages affect short run AS and why?b.) As short run AS adjusts, what will happen to price level P and spending for output AD?c.) When will the adjustments in the labor market, wages, and AS stop and why?Suppose the economy is experiencing a recessionary gap. In the long run, if there is no government intervention, the nominal wages will ______, unemployment will _____, and the price level will _______. A.fall; rise; fall B.fall; fall; fall C.rise; fall; rise D.rise; rise; riseWhat are the likely consequences of a government implementing a policy of austerity during a period of economic recession? A. It would stimulate economic growth by increasing consumer confidence. B. It would lead to a decrease in the unemployment rate. C. It would potentially deepen the recession by reducing overall demand. D. It would have no effect on the economy's performance.
- During an economic recession caused by a demand disturbance, use classical economics to describe how prices and wages adjust to help markets return to full-employment levels of operation. prices and wages decrease O prices increase, and wages decrease Oprices decrease, and wages increase O prices and wages increaseChoose the correct statement: Select one: a.There is a negative relationship between the price level and aggregate demand. b.lf the price level rises, the quantity of real GDP demanded (aggregate expenditure) falls. c.If the price level falls, the quantity of real GDP demanded (aggregate expenditure) rises. d.all of these are correct statementsWhat is the relationship between the price level and the following components of aggregate demand? a. There is (a negative/ no / a positive) relationship between the price level and consumption. b. There is (a negative/no/ a positive) relationship between the price level and investment. c. There is (a negative/no/ a positive) relationship between the price level and government spending. d. There is (a negative/no/ a positive) relationship between the price level and net exports.
- At which range the economy is producing at full employment according to the aggregate supply curve.? a. Intermediate range b. None of these c. Aggregate demand range d. Keynesian range e.Classical rangeFor each of the following, please explain each step and show it in the graph! a. Assume an economy is at full employment, but then consumer spending rises. What will most likely happen in the short run?If an economy is at full employment, an income tax cut will result in: a. an increase in LRAS and economic growth. b. a higher price level and more output in the short run, but only a higher price leve in the long run. c. a higher price level and more output in the short run, but only higher output in the long run. d. an increase in AD and increase output in the long run. e. a decrease in AD and an increase in capacity. Explain
- Suppose that a decrease in the demand for goods and services pushes the economy into arecession. In your own words, explain what happens to the price level and real GDP? Explainhow the economy will eventually get back to the potential output?Optimism Imagine that the economy is in long-run equilibrium. Then, perhaps because improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. Refer to Optimism. In the short run what happens to the price level and real GDP? Şelect one: a.the price level falls and real GDP rises. b.both the price level and real GDP fall. c.the price level rises and real GDP falls. d.both the price level and real GDP rise.f. Technological improvements increase productivity. gram to illustrate and explain how each of the following will affect the equilibrium price level and real GDP: a. Consumers expect a recession. b. Foreign income rises. c. Foreign price levels fall. d. Government spending increases. e. Workers expect higher future inflation and negotiate Use an aggregate demand and aggregate supply dia- higher wages now. In th