Suppose firms in this economy pay their workers efficiency wages. This practice will likely lead to a adjustment of the economy to its long-run equilibrium because firms will be likely to the wages of their employees.
Suppose firms in this economy pay their workers efficiency wages. This practice will likely lead to a adjustment of the economy to its long-run equilibrium because firms will be likely to the wages of their employees.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Suppose firms in this economy pay their workers efficiency wages. This practice will likely lead to a (faster, slower) adjustment of the economy to its long-run equilibrium because firms will be (less, more) likely to (reduce, raise) the wages of their employees.
Transcribed Image Text:Which of the following statements best describes how the economy will adjust on its own in the long run?
High unemployment contributes to a decrease in aggregate demand, and the aggregate demand curve shifts to the left until the economy
is back at the long-run equilibrium.
Low unemployment contributes to an increase in aggregate demand, and the aggregate demand curve shifts to the right until the
economy is back at the long-run equilibrium.
Wages and resource prices fall, and the SRAS curve shifts to the right until the economy is back at the long-run equilibrium.
O wages and resource prices rise, and the SRAS curve shifts to the left until the economy is back at the long-run equilibrium.
Suppose firms in this economy pay their workers efficiency wages. This practice will likely lead to a
adjustment of the economy to its
long-run equilibrium because firms will be
likely to
the wages of their employees.
Transcribed Image Text:8. Applying the extended AD-AS model
The following graph shows an economy's aggregate demand curve and its short-run and long-run aggregate supply curves.
Suppose that net exports fall. The aggregate demand curve shifts from ADị to AD2. Also suppose that the government decides not to use a
stabilization policy and allows the economy to adjust on its own.
Determine which curve, the aggregate demand curve or the short-run aggregate supply curve, shifts when the economy adjusts in the long run. Use
either the blue line (circle symbol) to plot a new aggregate demand curve or the orange line (square symbol) to plot a new short-run aggregate supply
curve to show the economy in long-run equilibrium. Make sure the curve you plot is parallel to one of the existing curves.
Note: You can check the slope of each line by selecting it.
(?)
200
LRAS
180
New AD
180
140
120
New SRAS
100
80
SRAS
AD
1
60
40
20
AD.
2
4
10 12
14
16
18
20
REAL GDP (Trillions of dollars)
PRICE LEVEL
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education