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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Price Level O B Price Level Quantity of Output Quantity of Output Refer to the Figure 14-1. In the short run, what would result from a favourable shift in aggregate supply? O a. It would move the economy from A to B. O b. It would move the economy from B to C. Oc. It would move the economy from C to D. O d. It would move the economy from D to A.
Consider the graph at right showing the long-run aggregate supply (LAS) and the aggregate demand (AD) curves. Suppose the long-run aggregate supply curve shifts to a real GDP level of $75. O A. The equilibrium price level will fall, and equilibrium real GDP will decrease. B. The equilibrium price level will fall, and equilibrium real GDP will increase. C. The equilibrium price level will rise, and equilibrium real GDP will increase. OD. The equilibrium price level will rise, and equilibrium real GDP will decrease. ----- Price level Po LRAS AD 0 10 20 30 40 50 Real GDP 60 70 80 90 100
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The economy is depicted in the graph to the right. a. Suppose, there are new discoveries of key raw materials. Which of the following best describes the result of this event? O A. The short-run aggregate supply curve shifts out while the long-run aggregate supply curve shifts in. OB. Both the short-run and long-run aggregate supply curves shift outward. OC. The short-run aggregate supply curve shifts inward while the long-run aggregate supply curve shifts outward. OD. Both the short and long-run aggregate supply curves shift inward. b. Complete the diagram. 1.) Using the line drawing tool, draw the new long-run aggregate supply curve representing this shock. Label it as LRAS,. 2.) Using the 3-point curved line drawing tool, draw the new SRAS representing this shock. Label it 'SRAS,'. Carefully follow the instructions above, and only draw the required objects. to search O
Figure 34-3 PRICE LEVEL aaa" LRAS B Y, Y₂ QUANTITY OF OUTPUT SRAS. SRAS AD Refer to Figure 34-3. In Figure 34-3, point B represents a short-run equilibrium and a long-run equilibrium. short-run equilibrium, and Point A represents a long-run equilibrium. long-run equilibrium, and Point A represents a short-run equilibrium. long-run equilibrium, and Point C represents a short-run equilibrium.
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Suppose now the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. This change in policy will cause the natural rate of unemployment to fall ▼ which will: O Not impact the long-run aggregate supply curve O Shift the long-run aggregate supply curve to the left O Shift the long-run aggregate supply curve to the right Complete the following table by determining how each event impacts the position of the long-run aggregate supply (LRAS) curve. An investment tax credit increases the rate at which firms acquire machinery and equipment. Many workers leave to pursue more lucrative careers in foreign economies. For environmental and safety reasons, the government requires that the country's nuclear power plants be permanently shut down. Direction of LRAS Curve Shift No shift ▼ No shift Right
How do prices change due to an economic contraction that is caused by a shift in aggregate demand? O a. They rise in the short run and fall back to their original level in the long run. b. They fall in the short run and fall even more in the long run. c. They rise in the short run and rise even more in the long run. d. They fall in the short run and rise back to their original level in the long run.
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Assume an ecomy operates in the intermediate range of its aggregate supply curve. State the direction of shif for the aggregate demand curve or aggregate supply curve for each of the following changes in conditions. What is the effect on the price level? On real GDP? On employment?
12. Assume that an economy operates according to the sticky-wage model. The nominal wage was set to make labor supply and labor demand equal when the expected price level equaled 120 (as measured by the consumer price index). a. Use a graph of the labor market to illustrate what happens to the quantity of labor employed if the actual price level over the time period when wages are stuck equals 110. b. Use a graph of the production function to illustrate how the quantity of output produced changes if the actual price level equals 110 when the expected price level is 120. c. Given the unexpectedly low price level, will this economy be operating above, below, or at the natural rate?