Suppose an economy is at the short run equilibrium which its current output level called Y1, is below the full employment output level called Yf. If the government does nothing, discuss how the economy restores its long run equilibrium level of output?

Q: a change in business investment a determinant of aggregate demand or aggregate supply? What happens…

A: The entire amount of money or sales profits that the seller expects to receive from the sale of…

Q: True or false The aggregate supply curve is vertical in the long run at the full-employment level…

A: According to the given question Answer is TRUE

Q: The demand for Home output from foreign countries increased in an economy which was initially in the…

A: In an open economy, foreign consumers can make the demand for home output and the quantity sold to…

Q: Starting with long-run equilibrium, illustrate with a figure and explain the effect of a decrease in…

A: In economics, the long run is a hypothetical idea wherein all markets are in harmony, and all costs…

Q: Assume that the United States economy is currently in a recession in a short-run equilibrium. Draw…

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Q: Which of the following is true about Long Run Equilibrium? a. the economy is experiencing Long Run…

A: In the long-run, it can be said that an economy can be operated potentially by using all the…

Q: Given the economic conditions depicted by the graph, answer the following questions. True or False:…

A: The above diagram depicts a situation where the economy is in short-run equilibrium. The point where…

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

A: A minimum wage law gives rise to unemployment in the economy as the wage set by the government is…

Q: Which of the following describes the use of Keynesian macroeconomic policy to resolve an…

A: Inflationary gap is the difference between actual real GDP and potential real GDP.

Q: 60 60 65 70 75 80 85 90 95 100 OUTPUT Given the economic conditions depicted by the graph, answer…

A: In short-run (SR) the output, income levels are below the full employment level that is…

Q: What effect will an increase in taxes have on the equilibrium level of output when the IS curve…

A: Following table represents the contractionary and expansionary fiscal policy:

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: Assume the following model of the closed economy in the short run, with the price level (P) fixed at…

A: Since you have provided multiple sub-parts questions, we will solve the first three subparts for…

Q: The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run…

A: When an economy produces products at a point where full employment and potential GDP are attained, a…

Q: Which of the following occurs when an expansionary gap is closed in the long run by the action of…

A: Answer: Correct option: d (Output decreases, and the price level increases) Explanation: The…

Q: Instructions: Enter your answer as a whole number. If you are entering a negative number include a…

A: AD has to increase by (480 - 400) = $80 billion.

Q: Question 2 How would you define price stickiness? How does this phenomenon lead to an increase in…

A: Price stickiness can be defined as adjustment of price mechanism on the basis of market…

Q: Austria is one of the largest exporters of oil. At the end of 2019, the global price of oil fell…

A: Austria Economy: The economy of Austria is an all-around created social market economy, with the…

Q: Draw AS/AD curve with the initial curves represented with AS0 and AD0 and the equilibrium with point…

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

Q: The Chinese economy is at full employment when the global economy goes into recession. Explain the…

A: Global recession: It refers to the level of unemployment at the global level. The increase in the…

Q: or False: The economy is currently in short-run equilibrium.

A: True  The economy is in short run equilibrium where SRAS = AD at 80 units of output and $ 100 price…

Q: The school of thought that emphasizes the natural tendency for an economy to move toward a…

A: The economics as a study is a very vast area of study, because economics is found in every aspect of…

Q: (a) - Use Point 1 and Point 2 to explain the difference between the short-run equilibrium and the…

A: a. In the figure horizontal axis represents real GDP and vertical axis represents price level. In…

Q: Refer to the above graph. Which of the following statemen Copyrighted material - not to be shared.…

A: Given the short-run equilibrium price = 130 The equilibrium quantity = 8

Q: In the basic Keynesian model, a decline in autonomous spending: Group of answer choices a. reduces…

A: Keynesian economics recommends that in troublesome times, the certainty of businessmen and consumers…

Q: If wages and prices are fully flexible, output gaps will automatically close in The Ling-Run The…

A: Short run refers to the period of time where at least one factor of production is fixed. Long run…

Q: When an economy is operating in a positive output gap (Inflationary Gap) which of the following must…

A: An inflationary gap is where potential GDP is less than the actual real GDP in the economy.

Q: Explain how equilibrium wages and employment change in the economy when there is an increase in the…

A: The increase in working-age immigrants affects the equilibrium wages and employment of existing…

Q: Consider the long-run equilibrium output, the potential output, the full-employment output, and the…

A: The quantity of goods and services that are being produced in an economy during a given time span is…

Q: Potential real GDP is defined as: Group of answer choices The quantity of output that the economy…

A: Real GDP is the value of final goods and services produced in the economy within a given period of…

Q: Full employment output is the level of output that firms in the economy supply when A- all capital…

A: Full employment output refers to the output level that results from the equilibrium in the labor…

Q: Which of the following scenarios is an example of a recognition lag? The economy: a)enters a deep…

A: DISCLAIMER “Since you have asked multiple question, we will solve the first question for you. If you…

Q: When an economy is operating in a negative output gap (Recessionary Gap) which of the following must…

A: A recessionary gap is where the potential output is higher than the actual output in the conomy.

Q: Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly…

A: If the government and the Federal Reserve take no policy action in response to the recession - The…

Q: The French economist Jean-Baptiste Say trans-  formed the equality of total output and total…

A: OPTION C - Supply creates its own demand This is called the Say's Law.  It says that if a good is…

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: Question : AS and AD Discuss the impact of an increase in TFP on the economy on potential…

A: Increase in the total factor productivity (TFP) allows the firm to produce higher output with the…

Q: Suppose an economy is in long-run equilibrium when a fiscally conservative government cut…

A:

Q: Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market…

A: Financially, those for migration contend that settlers help the economy by expanding the work supply…

Q: The graph above refers to a significant increase in individual income taxes, taking them to their…

A: The aggregate demand is summation of consumption expenditure, investment expenditure, government…

Q: How would the long-run equilibrium output change if the price level fell?  Decrease, Increase or No…

A: The aggregate supply is the total amount of services and commodities that firms in an economic plan…

Q: The structural unemployment rate is 1.3 percent, the frictional unemployment rate is 2.1 percent,…

A: Answer Formula: Natural unemployment rate = structural unemployment rate + frictional unemployment…

Q: Suppose the country of Nickeltown decides to increase government spending. In which of the following…

A: When the country of Nikeltown decides to increase government spending ,then the policy would be most…