Both the Great Recession and the Great Depression a. had unemployment peaking at 10% b. were caused by short-run aggregate supply shocks c. were associated with falling prices d. were associated with a financial crisis
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- Which of the following would decrease short run aggregate supply? a decrease in resource costs a decrease in expected rate of inflation negative supply shocks, ex. covid-19 outbreak all of the above none of the aboveWhich only affects short run aggregate supply? Choose all that apply. Group of answer choices Inflationary expectations Input prices Saving Technology Number of resourcesHouseholds and businesses were surprised by oil price increases in 1970s. What happened because of this supply shock?A) The economy experienced disinflation.B) Lenders were made better off at the expense of borrowers becoming worse off.C) Households had an increased incentive to save money.D) Firms experienced an increase in their operating costs.
- The business cycle occurs because A. the government is constantly trying to produce an inflationary gap, but expenditures in the economy cannot keep pace with the government's agenda B. aggregate demand and short-run aggregate supply fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP C. potential GDP is increasing, and increases in aggregate demand cannot keep pace with increases in long-run aggregate supply D. the Bank of Canada is constantly increasing the quantity of money.A worldwide drought has reduced food production. Inflation has increased, unemployment has risen above the natural rate, Pakistani’s are frustrated with their government. Your roommate says, "This economic mess has got to be somebody's fault—probably the Prime Minister or National Assembly. A year ago, both inflation and unemployment were lower. We need to vote in some policymakers that know how to get rid of this inflation and unemployment." a. If policymakers increase aggregate demand in response to the supply shock, in what direction will the economy move along the new short-run Phillips curve? What will happen to inflation and unemployment? b. Is there a policy that can immediately reduce both inflation and unemployment? Explain.A permanent supply shock _________ potential output. A temporary supply shock shifts the short-run aggregate supply schedule, and __________ potential output. changes, does not change does not change, changes does not change, does not change changes, changes
- In Great Recession what was the beginning and end dates of this downturn, the cause of this recession, and the depth of the recession.Aggregate supply curve slopes upward to the right because of sticky profits. True or False. TrueFalseA worldwide drought has reduced food production. Inflation has increased, unemployment has risen above the natural rate, Pakistani’sare frustrated with their government. Your roommate says, "This economic mess has got to be somebody's fault—probably the Prime Ministeror National Assembly. A year ago, both inflation and unemployment were lower. We need to vote in some policymakers that know how to get rid of this inflation and unemployment." a.If policymakers increase aggregate demand in response to the supply shock,in what direction will the economy move along the new short-run Phillips curve? What will happen to inflation and unemployment?b.Is there a policy that can immediately reduce both inflation and unemployment? Explain.
- Fill-in-the-Blank: The economy self-corrects for a short-run recession through __________ wages and prices.A movement down and to the left along the aggregate supply curve will occur when a. a change in fiscal policy causes aggregate expenditure to increase b. a decrease in real GDP causes unit costs to fall c. world oil prices fall, thus decreasing the price level d. firms decide to produce less than before at each price levelAssume the Pakistan’s economy is in recession: Pakistan implements a combination of expansionary fiscal and monetary policy. In the absence of complete crowding out what will be the effect of these policies on each of the following:(i) Aggregate demand in Pakistan(ii) The price level in Pakistan(iii) Interest rates in Pakistan