Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. O Nominal wages, prices, and perceptions adjust upward to this new price level. O The government increases spending to increase aggregate demand. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to nominal wages at the new short-run equilibrium. Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium. Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium. Real wages at the initial equilibrium are equal to real wages at the new long-run equilibrium. Judging by the impact of the money supply on nominal and real wages, this analysis effects in the short run but is neutral in the long run. is/isn't consistent with the proposition that money has real
Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. O Nominal wages, prices, and perceptions adjust upward to this new price level. O The government increases spending to increase aggregate demand. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to nominal wages at the new short-run equilibrium. Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium. Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium. Real wages at the initial equilibrium are equal to real wages at the new long-run equilibrium. Judging by the impact of the money supply on nominal and real wages, this analysis effects in the short run but is neutral in the long run. is/isn't consistent with the proposition that money has real
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Now adjust the graph to show the new long-run equilibrium.
What causes the economy to move from its short-run equilibrium to its long-run equilibrium?
The government increases taxes to curb aggregate demand.
Nominal wages, prices, and perceptions adjust downward to this new price level.
O Nominal wages, prices, and perceptions adjust upward to this new price level.
O The government increases spending to increase aggregate demand.
Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply? Check all that
apply.
Nominal wages at the initial equilibrium are equal to nominal wages at the new short-run equilibrium.
Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium.
Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium.
Real wages at the initial equilibrium are equal to real wages at the new long-run equilibrium.
Judging by the impact of the money supply on nominal and real wages, this analysis
effects in the short run but is neutral in the long run.
is/isn't
consistent with the proposition that money has real](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F31237684-89ac-4bee-b96a-aade1094de8c%2F83ec6dc9-8bb4-4601-a338-10f08223a13b%2Fzamsjij_processed.png&w=3840&q=75)
Transcribed Image Text:Now adjust the graph to show the new long-run equilibrium.
What causes the economy to move from its short-run equilibrium to its long-run equilibrium?
The government increases taxes to curb aggregate demand.
Nominal wages, prices, and perceptions adjust downward to this new price level.
O Nominal wages, prices, and perceptions adjust upward to this new price level.
O The government increases spending to increase aggregate demand.
Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply? Check all that
apply.
Nominal wages at the initial equilibrium are equal to nominal wages at the new short-run equilibrium.
Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium.
Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium.
Real wages at the initial equilibrium are equal to real wages at the new long-run equilibrium.
Judging by the impact of the money supply on nominal and real wages, this analysis
effects in the short run but is neutral in the long run.
is/isn't
consistent with the proposition that money has real
![Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent.
Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium.
Price Level
LRAS
Aggregate Supply
Aggregate Demand
Quantity of Output
Aggregate Demand
Aggregate Supply
(?)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F31237684-89ac-4bee-b96a-aade1094de8c%2F83ec6dc9-8bb4-4601-a338-10f08223a13b%2Fyc7pzqq_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent.
Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium.
Price Level
LRAS
Aggregate Supply
Aggregate Demand
Quantity of Output
Aggregate Demand
Aggregate Supply
(?)
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