Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 9, Problem 3CQ
To determine
Explain the reason why the short-run
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Why does the short-run aggregate supply curve slope upward to the right? If the prices of both (a) resources and (b) goods and services increased proportionally (by the same percentage), would business firms be willing to expand output? Why or why not?
Suppose that an economy wants to boost available labor hours in order to increase aggregate supply. What is the best way to accomplish this?
A production possibilities curve (PPC) represents the maximum amount of two goods or services produced by manufacturers in an economy.
How are the PPC and long-run aggregate supply curve similar?
Chapter 9 Solutions
Economics: Private and Public Choice
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- In the long-run, aggregate supply is a horizontal line at the long-run price level people can afford. True False One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption. True Falsearrow_forwardSuppose that the U.S. economy is at full employment when strong economic growth in Asia increases the demand for U.S.-produced goods and services. How the U.S. price level and real GDP will change in the short run?arrow_forwardWhat kind of change would happen to aggregate demand, aggregate supply, and real GDP. if foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes.arrow_forward
- When does macroeconomic equilibrium occur? Multiple Choice When exports equal imports. When the aggregate supply equals the long-run Aggregate Supply When the aggregate demand equals the long-run Aggregate Supply. When the aggregate quantity demanded is equal to the aggregate quantity supplied.arrow_forwardIf the price level rises and the money wage rate rises by the same percentage, what happens to the quantity of real GDP supplied? Along which aggregate supply curve does the economy move?arrow_forwardUsing the aggregate supply–aggregate demand model, explain how output and prices are determined. Will output vary or stay fixed in the long run? Suppose the aggregate demand curve were to remain fixed: What can we infer about the behavior of prices over time?arrow_forward
- If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?arrow_forwardAssume that the United States economy is currently in a recession in a short-run equilibrium. Draw a correctly labeled graph of aggregate demand and aggregate supply in the recession and show each of the following. The long-run equilibrium output, labeled Yfarrow_forwardAssume that the long-run aggregate supply curve is vertical at Y = 3.000 while the short-run aggregate supply curve is horizontal at P=1.0, . The aggregate demand curve is Y = 2(M / P) and M = 1,500. a. If the is initially in long-run equilibrium, what are the values of P and Y? Draw the equilibrium using AD and short and long run AS curves.arrow_forward
- Suppose there is an international recession hits the US economy, what is the long-run equilibrium will look like? What changes in the U.S GDP? Does it affect to the long run aggregate supply and short run aggregate supply?arrow_forwardSuppose the economy is operating at potential GDP when it experiences an increase in export demand. How might the economy increase production of exports to meet this demand, given that the economy is already at full employment?arrow_forwardDiscuss about the three time horizons and what is the difference between the immediate short-run (ISR) and the short-run (SR) aggregate supply? a) In the immediate short run (IMR), ( input, output, both input & output ) prices are fixed, and the aggregate supply curve is ( upward sloping, downward sloping, horizontal , vertical ), and firms collectively supply exactly the level of output demanded at any given price level. b) In the short run (SR), ( input, output, both input & output ) prices are fixed or nearly fixed, and the aggregate supply curve is ( upward sloping, downward sloping, horizontal , vertical ) This is because nominal wages and input prices adjust only slowly to changes in the price level. With this curve, an increase in the price level increases real output and a decrease in the price level reduces real output. c) In the long run, all prices are ( fixed, flexible ) and the aggregate supply curve is ( upward sloping, downward sloping, horizontal, vertical ) at the…arrow_forward
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