Pearson eText Economics -- Instant Access (Pearson+)
13th Edition
ISBN: 9780136879459
Author: Michael Parkin
Publisher: PEARSON+
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Chapter 27.3, Problem 3RQ
To determine
Explain three types of short-run
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The long run in macroeconomics is the period of time in which prices do not change or do not change very much.
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In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen.
For example, the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. Consider a soybean farmer who expects a price level of 100 in the coming year. If the actual price level turns out to be 90, soybean prices will(FALL, RISE, OR REMAIN THE SAME) , and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by (REDUCING OR INCREASING) the quantity of soybeans supplied. If other producers in this economy mistake changes in the price level for changes in their relative prices, the unexpected decrease in the price level causes the quantity of output supplied to (RISE ABOVE OR FALL BELOW)…
Chapter 27 Solutions
Pearson eText Economics -- Instant Access (Pearson+)
Ch. 27.1 - Prob. 1RQCh. 27.1 - Prob. 2RQCh. 27.1 - Prob. 3RQCh. 27.1 - Prob. 4RQCh. 27.2 - Prob. 1RQCh. 27.2 - Prob. 2RQCh. 27.2 - Prob. 3RQCh. 27.3 - Prob. 1RQCh. 27.3 - Prob. 2RQCh. 27.3 - Prob. 3RQ
Ch. 27.3 - Prob. 4RQCh. 27.4 - Prob. 1RQCh. 27.4 - Prob. 2RQCh. 27.4 - Prob. 3RQCh. 27 - Prob. 1SPACh. 27 - Prob. 2SPACh. 27 - Prob. 3SPACh. 27 - Prob. 4SPACh. 27 - Prob. 5SPACh. 27 - Prob. 6SPACh. 27 - Prob. 7SPACh. 27 - Prob. 8SPACh. 27 - Prob. 9SPACh. 27 - Prob. 10APACh. 27 - Prob. 11APACh. 27 - Prob. 12APACh. 27 - Prob. 13APACh. 27 - Prob. 14APACh. 27 - Prob. 15APACh. 27 - Prob. 16APACh. 27 - Prob. 17APACh. 27 - Prob. 18APACh. 27 - Prob. 19APACh. 27 - Prob. 20APACh. 27 - Prob. 21APACh. 27 - Prob. 22APACh. 27 - Prob. 23APACh. 27 - Prob. 24APACh. 27 - Prob. 25APACh. 27 - Prob. 26APA
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- In the short run, the quantity of output supplied by firms can deviate from the natural level of output if the actual price level deviates from the expected price level in the economy. A number of theories explain reasons why this might happen. For example, the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. Consider a soybean farmer who expects a price level of 100 in the coming year. If the actual price level turns out to be 90, soybean prices will (decrease/not change/increase) , and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by (raising/lowering) the quantity of soybeans supplied. If other producers in this economy mistake changes in the price level for changes in their relative prices, the unexpected decrease in the price level causes the quantity of output supplied to (fall short of/exceed) the…arrow_forwardAn economy is described by the following equations: Cd = 1,600 + 0.8(Y – T) IP = 1000 G = 1,800 X = M = 0 T = 3,000 + 0.01Y What is the short-run equilibrium level of output in this economy? Group of answer choices 1.7600.5 2.7650.4 3.8420.5 4.9615.4arrow_forwardCurrently the Malaysian economy is experiencing inflation and unemployment at the same time. Discuss the causes on the Malaysian economic situation and explain the changes in the macroeconomic variables when macroeconomic policies are implemented.arrow_forward
- Assume 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_forwardThe Greek letter a represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that a = $2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion. Suppose the natural level of output is $60 billion of real GDP and that people expect a price level of 95. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 85, 90, 95, 100, and 105. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 10 20 40 50 60 70 30 OUTPUT (Billions of dollars) 80 90 100 O AS LRAS ? The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that…arrow_forwardStarting from long-run equilibrium, graphically illustrate and explain what happens to RGDP, the average price level, and unemployment if consumer confidence decreases.arrow_forward
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