11. Which of the following statements about the Long-Run Aggregate Supply (LRAS) are true? a) The LRAS represents the full-employment level of real GDP. b) The LRAS represents the level of income and production consistent with resource markets equilibrium. c) The LRAS represents the potential production of the economy. d) All of the above. e) None of the above.12. Which of the following describes the way in which the self-correcting mechanism of the economy resolves the problem of a recessionary gap? a) The recessionary gap is cured by an increase in government purchases of goods and services, which implies a shift to the right of the AD curve until full employment equilibrium is reestablished. b) The unemployment associated with a recessionary gap causes wages to fall, increasing Aggregate Supply and thus shifting the AS curve to the right until a full employment equilibrium is reestablished. c) The unemployment associated with a recessionary gap causes a decrease in Aggregate Supply, shifting the AS curve to the left until full employment equilibrium is restored. d) Both (a) and (b) are correct. e) None of the above13. According to Kyenes's Consumption function, (MORE THEN ONE CHOICE CAN BE PICKED) (a) Consumption spending is a function of disposable (after-tax) income (Yd). (b) There cannot be any consumption without disposable income. (c) Total consumption spending is omposed of automnomous consumption, independent of income (Ca), and induced consumption, determined by disposable income. (d) The induced consumption component is equal to a constant proportion of disposable income. (e) The induced consumption is equal to the marginal propensity to consume times disposable income (f) Is modified in the simplified version in the lecture notes to just real income. (g) Autonomous consumption cannot be changed by other factors

Long-Run Aggregate Supply (LRAS) shows the number of products and services produced in the economy…

Answered: 11. Which of the following statements…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter25: The Keynesian Perspective

Section: Chapter Questions

Problem 20CTQ: Suppose the economy is operating at potential GDP when It experiences an increase in export demand....

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11. Which of the following statements about the Long-Run Aggregate Supply (LRAS) are true?

		a) The LRAS represents the full-employment level of real GDP.
		b) The LRAS represents the level of income and production consistent with resource markets equilibrium.
		c) The LRAS represents the potential production of the economy.
		d) All of the above.
		e) None of the above.

12. Which of the following describes the way in which the self-correcting mechanism of the economy resolves the problem of a recessionary gap?

		a) The recessionary gap is cured by an increase in government purchases of goods and services, which implies a shift to the right of the AD curve until full employment equilibrium is reestablished.
		b) The unemployment associated with a recessionary gap causes wages to fall, increasing Aggregate Supply and thus shifting the AS curve to the right until a full employment equilibrium is reestablished.
		c) The unemployment associated with a recessionary gap causes a decrease in Aggregate Supply, shifting the AS curve to the left until full employment equilibrium is restored.
		d) Both (a) and (b) are correct.
		e) None of the above

13. According to Kyenes's Consumption function, (MORE THEN ONE CHOICE CAN BE PICKED)

		(a) Consumption spending is a function of disposable (after-tax) income (Yd).
		(b) There cannot be any consumption without disposable income.
		(c) Total consumption spending is omposed of automnomous consumption, independent of income (Ca), and induced consumption, determined by disposable income.
		(d) The induced consumption component is equal to a constant proportion of disposable income.
		(e) The induced consumption is equal to the marginal propensity to consume times disposable income
		(f) Is modified in the simplified version in the lecture notes to just real income.
		(g) Autonomous consumption cannot be changed by other factors

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