MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Question
Chapter 6, Problem 8DQ
To determine
Short run flexibility.
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Are all prices in the economy equally inflexible? Which ones show large amounts of short-run flexibility?
If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?
What happens when firms and workers underestimate future prices in the economy? Focus your answer on what would happen to actual output as opposed to the expected potential output. (Course is macroeconomics).
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- Why does the short-run aggregate supply curve slope upward to the right? If the prices of both (a) resources and (b) goods and services increased proportionally (by the same percentage), would business firms be willing to expand output? Why or why not?arrow_forwardWhat happens when firms and workers underestimate future prices in the economy? Explain the answer while focusing on what would happen to actual output as opposed to the expected potential output.arrow_forwardSuppose the economy is operating at potential GDP when it experiences an increase in export demand. How might the economy increase production of exports to meet this demand, given that the economy is already at full employment?arrow_forward
- Assume an economy is currently operating at point A. What key policy recommendations would you make for an economy like this one that is currently operating at point A? Justify why you believe this is appropriate policy.arrow_forwarddescribe what happens when firms and workers underestimate future prices in the economy. what would happen to actual output as opposed to the expected potential output.arrow_forwardSuppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?arrow_forward
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