Answered: Price level 130 120 110 16.7 Potential…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Refer to the following figure

1. For this economy, if the actual price level exceeds the
expected price level, how much output will the economy
produce in the short-run?
A)$17 trillion
B)$17.2 trillion
C)$16.7 trillion
D) Both A and C.
2. Given the situation in part (a), this economy would
experience
A) a recessionary gap of $0.3 trillion
B) an expansionary gap of $0.2 trillion
C) neither a recessionary gap nor an expansionary gap.
D) an expansionary gap of $17.2 trillion.

3. Given the situation in part (a), in this economy (circle
the letter representing the right answer below)
A) the actual rate of unemployment would be less than the
natural rate of unemployment.
B) the actual rate of unemployment would be above the natural
rate of unemployment.
C) the actual rate of unemployment would be equal to the
natural rate of unemployment.
D)none of the above.
4. In this economy, given the situation in part (a), in the
long-run (circle the letter representing the right answer
below)
A) the nominal wage would decrease and output would fall to
the potential level of output.
B) the nominal wage would increase and output would rise
above the potential level of output.
C) the nominal wage would decrease and output would fall
below the potential level of output.
D) the nominal wage would increase and output would fall to
the potential level of output.

4
e) In an economy, if structural unemployment decreases while the
other types of unemployment remain unchanged, then (circle the
letter representing the right answer below)
A) the natural rate of unemployment and potential GDP will
remain unchanged.
B) the natural rate of unemployment and potential GDP will both
decrease.
C) the natural rate of unemployment will increase and potential
GDP will decrease.
D) the natural rate of unemployment will decrease and potential
GDP will increas