Then the world economy expands and the demand for Canadian-produced goods increases. Draw a curve that shows: 1) the effect of increased demand for Canadian-produced goods. Label it 1. 2) the effect of a rising money wage rate that returns the economy to full employment. Label it 2. Draw a point at the new long-run equilibrium. An economy is in a long-run equilibrium. An increase in aggregate demand creates the money wage rate decreases gap. A rise in and returns the economy to a full-employment equilibrium. O A. a positive; short-run aggregate supply O B. a recessionary; short-run aggregate supply OC. an inflationary; short-run aggregate supply and long-run aggregate supply OD. an inflationary; the quantity of real GDP demanded 140 130- 120- 110 100- 90 80+ 1.6 LAS 1.8 1.9 1.7 Real GDP (trillions of 2007 dollars) SAS AD 2.0

Then the world economy expands and the demand for Canadian-produced goods increases. Draw a curve that shows: 1) the effect of increased demand for Canadian-produced goods. Label it 1. 2) the effect of a rising money wage rate that returns the economy to full employment. Label it 2. Draw a point at the new long-run equilibrium. An economy is in a long-run equilibrium. An increase in aggregate demand creates the money wage rate decreases gap. A rise in and returns the economy to a full-employment equilibrium. O A. a positive; short-run aggregate supply O B. a recessionary; short-run aggregate supply OC. an inflationary; short-run aggregate supply and long-run aggregate supply OD. an inflationary; the quantity of real GDP demanded 140 130- 120- 110 100- 90 80+ 1.6 LAS 1.8 1.9 1.7 Real GDP (trillions of 2007 dollars) SAS AD 2.0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, the aggregate supply curve is vertical in the diagram because: A) nominal wages and other input prices are assumed to be fixed. B) real output level Qf is the potential level of output. C) price level increases produce perfectly offsetting changes in nominal wages and other input prices. D) higher than expected rates of actual inflation reduce real output only temporarily.
Price Level Aggregate Demand Aggregate Supply 200 10,000 4,000 300 9,000 6,000 400 8,000 8,000 500 7,000 9,000 600 6,000 9,500 700 5,000 9,800 800 4,000 9,900 The table above shows the initial aggregate supply and demand data for a country. If input prices rise and AS shifts to the left by 2,000 units at each price level, what is the new equilibrium output level? 8,000 O 2,000 7,000 O 6,000
An improvement in the level of technology in an economy will result in An upward movement along the aggregate supply curve An outward shift of the aggregate supply curve O A downward movement along the aggregate supply curve An inward shift of the aggregate supply curve
2) Use the table above to answer the following questions.a) What is the value of real GDP and price level at the long run macroeconomic equilibrium?b) What is the value of real GDP and price level at the short run macroeconomic equilibrium?c) Is the short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium?d) How will this economy return to its long run equilibrium? Explain using self-correctingmechanism.
Along the long-run aggregate supply curve, the level of Real GDP supplied with increases in the price level. O does not change O increases O decreases slightly O decreases dramatically
The following events have occurred in the history of the United States: A deep recession hits the world economy. The world oil price rises sharply. S. businesses expect future profits to fall. Explain the combined effects of these events on U.S. real GDP and the price level, starting froma position of long-run equilibrium.
Suppose the economy is in the long-run equilibrium. b. Now suppose war in the world's main oil- producing region sharply reduces the world oil supply, causing oil prices to rise and increasing the costs of producing goods and services in this economy. Use your diagram to show what happens to output and the price level in the short run. c. Use the sticky-wage theory of aggregate supply to explain what will happen to output and the price level in the long run (assuming there are no policy changes). What role does the expected price level play in this adjustment? Be sure to illustrate your analysis in a graph.
The long-run aggregate supply curve shifts right if Answer immigration from abroad increases. the capital stock increases. technology advances. All of the above are correct.
The Greek letter a represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that a = $2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion. Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 110. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 10 20 ☐ 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 -0- AS LRAS (?) The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level…
If the economy starts at O and moves to R in the short run, the economy PRICE LEVEL R LRAS O O moves to O in the long run. moves to P in the long run. moves to Q in the long run. a QUANTITY OF OUTPUT O stays at R in the long run. AD₂ SRAS, SRAS, AD
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2.2. In macroeconomics, the immediate short run is known as a length of time when both input prices and output prices are fixed. In the short-run, input prices are fixed but output prices are variable. In the long run, input prices and output prices can vary. Describe the AS curve in the Immediate Short run. Describe the AS curve in the Short run. Describe the AS in the Long run.