None When aggregate demand declines, efficiency wages might contribute to downward wage inflexibility, at least for a time,because wage cuts can O increase employment and GDP. O cause aggregate supply to fall. O reduce productivity, raiseper-unit labor costs, and be self-defeating. O cause people to quit their jobs.

When aggregate demand experiences a decline, a multitude of factors come into play, shaping the…

Answered: When aggregate demand declines,…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 4CQQ

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When aggregate demand declines, efficiency wages might contribute to downward wage inflexibility, at least for a time, because wage cuts can O increase employment and GDP. O cause aggregate supply to fall. O reduce productivity, raise per-unit labor costs, and be self-defeating. O cause people to quit their jobs.
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Price Level 0 AS₁ a ASO b c Real GDP Refer to the figure above. If aggregate supply is AS, and aggregate demand is ADo, then: a surplus of real output of gh yould f represents a price level that would result in a surplus of real output of ac f represents a price level that would result in a shortage of real output of ac f represents a price level that would result in a surplus of real output of a at any price level above g. a shortage of real output would occur occur
The economy begins in a long-run equilibrium. Then something causes AD to decrease. What would result after this decrease in the short-run? O inflation and a recession O inflation and an expansion O deflation and a recession O deflation and an expansion
The economy has shifted and the quantity of the real GDP supplied has increased. What has potentially happened to aggregate price levels? Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. O Potentially the price levels have decreased to a lower aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have fired some employees as labor has become too expensive.
Price Level AS O a b c ASO Real GDP Refer to the figure above. If aggregate supply is AS, and aggregate demand is ADo, then: a surplus of real output of gh would frepresents a price level that would result in a surplus of real output of ac f represents a price level that would result in a shortage of real output of ac f represents a price level that would result in a surplus of real output of a at any price level above g. a shortage of real output would occur occur
Give typing answer with explanation and conclusion
Which of the following will NOT shift the Long run Aggregate Supply (LAS) curve O an increase in the money wage rate. O a change in the capital stock. O technological progress. O an increase in the stock of human capital.
For a given aggregate supply curve, if the aggregate price level in an economy rises, O real GDP increases aggregate supply increases aggregate demand increases
Let's assume that the economy of a country is experiencing sticky wages and sticky prices. One of these four answers describes what happens to the economy in the immediate term after a reduction in AD. Which one? Price $100 $70 250 900 1250 Quantity S D₁ Do O None of the other answers O The economy will remain at the original equilibrium levels of price and output. O The price will drop to $70 and the equilibrium quantity will be $900. O The economy will produce at the original equilibrium price, but quantity demanded will drop, creating a surplus of 1,000 units.
Why does an inflationary output gap lead to increased price levels? O a. Demand is too high O b. Capital and labor are fixed in the short-run O C. Potential GDP is too low O d. The government increases price levels Supply is too low

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