Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 11, Problem 9CQ
To determine
The impact of increase in aggregate
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Why unemployment results when Aggregate Demand is lesser than Aggregate Supply in the economy?
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Empirical studies indicate that the long-run trend in real GDP of the USA has an upward trend. How is this possible given business cycles and macroeconomic fluctuations? What factors explain the upward trend despite the cycles?
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Economics: Private and Public Choice (MindTap Course List)
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- Is there a connection between the concepts of Long Run Aggregate Supply and the Natural Rate of Unemployment? Describe precisely how you think an economy would move towards long run equilibrium over time.arrow_forwardIn the short run, an increase in the unemployment rate is likely to be accompanied byarrow_forwardSuppose you are an advisor to the Business Cycle Dating Committee. You are asked to look at macroeconomic data to evaluate whether the economy has entered a recession this year. Which data do you look at? How does the economy behave at the onset of a recession? Explain how unemployment changes over the business cycle. Why do these changes occur?arrow_forward
- Economists forecast future economic conditions by studying variables that tend to fluctuate in advance of the overall economy. The most significant of these variables are known as leading indicators, and they compose the index of leading economic indicators. Which of the following variables are measured as part of this index? Check all that apply. Supplier deliveries The ratio of elderly to nonelderly workers New orders for consumer goods Stock prices The money supply True or False: Businesses and government care only about long-run economic forecasts, because they cannot adapt policy or output to accommodate short-run fluctuations. False True Suppose the most recent data show that the average initial weekly claims for unemployment insurance have recently decreased. This change suggests ____ period in the coming months.arrow_forwardFor a country, economists have estimated that structural unemployment is 2.0% and frictional unemployment is 3.0%. If total unemployment is currently 4.0%, this suggests that: a) The economy is in a recessionary gap, with actual output greater than potential output. b) The economy is in an inflationary gap, with actual output greater than potential output. c) There is no output gap, and actual output is equal to potential output. d) The economy is in a recessionary gap, with actual output less than potential output. e) The economy is in an inflationary gap, with actual output less than potential output.arrow_forwardDuring 2007 and 2008, housing prices fell sharply. Use the AD–AS model to illustrate the impact of these price declines on output and employment. Evaluate the following statement. The AD–AS model indicates that the decrease in housing prices increased wealth, stimulated aggregate demand, and generated an economic boom. True Falsearrow_forward
- In the CNN video, Sarlin interviews a journalist who explains the reason people pay feel worse about the economy, even when it is considered by all measures a "good" economy. What is this reason? People feel worse about the economy because they want to be in the top 1% or top 10% of the income ladder; expectations of wealth and status are so high that people are disappointed by their unrealistic expectations The fact that wages have been stagnant for forty years does little to offset these wage increases and people's ability to find affordable housing and finance their education. People will complain no matter what is happening with the economy so it's best to ignore them and look at the economic data. Even though wages are up, the fact that inflation is still high makes it difficult for many people to feel like they are doing well financially.arrow_forwardIf aggregate demand (AD) decreases, then output will increase; return to the previous level remain unchanged; increase increase; increase decrease; decrease decrease; return to the previous level in the short run and in the long run.arrow_forwardShould the US be more concerned about deflationary pressure or inflationary pressure at this time? Are there strong indicators of deflation given the state of the automobile market and housing market?arrow_forward
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