Carefully explain why the price level are rigid in the short run (SR).  Illustrate your answer using a real world example where a price of an item may not change for months even though the raw material cost to produce that item may change.

Q: According to Classical Point of view A) Cyclical Unemployment might occur temporarily B) All goods…

A: Classical economics is a term that refers to the dominant school of thought for economics in the…

Q: Which of the following statements are true? Which are false? Explain why the false statements are…

A: The aggregate supply is the complete amount of products expected to be distributed by enterprises in…

Q: Each of the following events caused a shift in the AD or AS curve in Canada. Identify which curve…

A: Each of the following events caused a shift in the AD or AS curve in Canada. Identify which curve…

Q: Why are nominal wages sticky (adjust slowly) in the short run? wage contracts are made…

A: Wage or price stagflation indicates that the economy is not always running at total capacity. In the…

Q: Consider the AD/AS model. In the long run, after factor prices have fully adjusted to any output…

A: GDP is the total values of all final goods and services provided by a nation during particular…

Q: Describe what happens when firms and workers underestimate future prices in the economy. Focus your…

A: An economy consist of households and business working in a circular flow in order to achieve their…

Q: In your own words, describe what happens when firms and workers underestimate future prices in the…

A: When there is a continuous reduction in the prices within the economy then it is stated as…

Q: Suppose an economy is at the short run equilibrium which its current output level called Y1, is…

A: When the current output level is below the full employment level, it means economy is not operating…

Q: Diagrammatically  represent the  effect on the price  level and real GDP in the short run of each of…

A: Real gross domestic product is the aggregate of the values of all final goods and services produced…

Q: Refer to the information provided in Figure below to answer the question that follow. B AD AD AD…

A: (b)

Q: Unemployment can be caused by a decrease of aggregate demand OR a decrease of aggregate supply.  Do…

A: Change in both aggregate demand and aggregate supply have impact on price level, employment and real…

Q: How would you define price stickiness? How does this phenomenon lead to an increase in the short run…

A: Price stickiness is the situation in which price adjusts by itself and stays same for a certain…

Q: government increases spending on national defense. based on the statement above, explain the…

A: I will show the effect of the increased spending on the national defense by using the AD-AS model.…

Q: Keynesian theory suggests that in the short run _________ a prices fluctuate significantly. b wages…

A: Keynesian theory suggests that in the short run wages and prices are sticky, meaning that they do…

Q: In the short run, what is the impact on the price level and the level of the real GDP of each of the…

A: In equilibrium, the supply and demand curves intersect at E and the price level is at P0 and GDP…

Q: Suppose the economy is self-regulating, the price level is 132, the quantity demanded of Real GDP is…

A: It can be said that the economy is in short-run equilibrium as the aggregate demand (AD) is equal to…

Q: If firms become more optimistic about the future of the economy and, at the same time, innovation in…

A: When the economy as well as the people in the economy becomes optimistic about the future, then they…

Q: Suppose the economy is self-regulating, the price level is 132, the quantity demanded of Real GDP is…

A: In the short run, aggregate demand is 4 trillion and aggregate supply is 3.9 trillion. Aggregate…

Q: Using the line drawing tool, show the effect on the aggregate demand curve, and label your new…

A: Aggregate demand refers to the collective demand for goods and services in an economy. It has a…

Q: Refer to the information provided in Figure below to answer the question that follow. AS Price…

A: Multiplier: A multiplier in economics is a economic factor that, when changed or increased, causes…

Q: For each of the following events, explain the short-run and long-run effects on output and the price…

A: The short-run equilibrium is determined where the short-run aggregate supply (SRAS) is equal to the…

Q: observed correlation between the price level and real GDP may be low because

A: The price level in an economy is negatively correlated to the real GDP.

Q: Determine whether each of the following would cause a shift of the aggregate demand curve, a shift…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Suppose the people of Canada has reduced their spending on goods and services from the United…

A: When the people of Canada has reduced their spending on goods and services from the United States,…

Q: Using a separate set of AS-AD diagrams for each of the following scenarios, explain what is likely…

A: The AD-AS (aggregate demand-aggregate supply) model depicts however value is set and the way worth…

Q: theory of macroeconomic fluctuations is also the short run model of the macroeconomy and assumes…

A: Microeconomics is a part of standard economical matters that concentrates on the way of behaving of…

Q: Beginning in March 2013, federal government spending was resstrained due to the sequester (feel free…

A: Aggregate demand (AD): Aggregate demand broadly refers to the total demand for goods and services in…

Q: Which of the following is implied by a rightward shift in the economy's AS curve? There is a demand…

A: Aggregate supply (AS): - It is the total supply of goods and services in an economy at a particular…

Q: Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply…

A: The aggregate supply curve represents the total supply of goods and services by an economy at each…

Q: In the long- run, the level of output is independent of the price level * O True False

A: Output refers to the quantity of goods and services produced by an individual, firm, or country in a…

Q: Suppose the full-employment level of real output (Q) is $250 and the price level (P) is initially…

A: (a) When the price level suddenly rising from 100 to 125 due to an increase in aggregate demand,…

Q: “Members of Congress are interested in increasing the minimum wage from its current rate of $7.25 an…

A: Low-skilled workers generally find it difficult to find a job. Their value is very less and they…

Q: What is the reason behind why the SRAS curve is upward sloping?     There are few unutilised…

A: The short-run aggregate supply curve (SRAS) depicts the positive relationship between output and…

Q: For each of the following events ,explain the short-run and long-run effects on output and the price…

A: The short-run and long-run effect on output and the price level are the following:a.The stock market…

Q: Identify which curve on the previous graph corresponds to each description in the following table.…

A: A recessionary gap, or contractionary gap, happens when a country's genuine/real GDP is lower than…

Q: Part 2 Answer questions a through F on the basis of the following graph:  e. If the actual price…

A: e) Based on the graph, If the actual price level equals the expected price level reflected in long…