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 9, Problem 7CQ
To determine
Explain the reason why it is possible for the economy to temporarily achieve output levels beyond the long-run potential level.
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Economics: Private and Public Choice (MindTap Course List)
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- Suppose the government undertakes a large spending program to build community colleges and to make higher education free for many low-income families. How would you expect the program to affect output in the short run? Assuming that the program succeeds in increasing the skills of some workers, how would you expect it to output in the long run?arrow_forwardFor each of the following scenarios predict how the price level and output will change over time from immediate impact to long-run impact. In each case, consider an economy that was initially producing at its level of potential output. a. The government passes legislation that increases corporate taxes by 25%. b. Economies around the globe are experiencing a time of prosperity and, as a result, demand for U.S. exports increases.arrow_forwardConsider the long-run equilibrium output, the potential output, the full-employment output, and the natural rate of output. Are their output levels the same or different?arrow_forward
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- Assume that the total productivity in our country decreases (a negative shock to the production function). a) Using a graph, What happens to the demand curve for labor? b) Using a graph, How would the decline in productivity affect the labor market (employment, unemployment and real wages), if labor market is always in equilibrium? c) Using a graph, How would decreases in productivity affect the labor market if unions prevented the decline in real wages?arrow_forwardAssume a country would like to increase investment by limiting consumption. What would be the point of a policy like that? What would be the impact on the economy? Who would benefit? Who would lose out?arrow_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_forward
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