When there ae no unplanned inventory changes, the economy in a short run equilibrium and in a long nun equilibrium O a may or may not be, is O b. is, is not Oc. is; may or may not be O d. is; is also Starting from a long run equilibrium, if a sudden decrease in household weaith causes a shift in AD, the economy will experience: O a. the same level of prices and lower real GDP in the short run. O b. higher prices and lowerreal GDP in the short nun. O e. lower prices and lower real GDP in the short run. Od. lower prices and the same level of GDP in the short run. Which of the following is NOT one af the reasons for the slow adjustment of input prices? O a. Menu costs Ob. Increased productivity O c. Inventories Od. Long-term contracts

When there ae no unplanned inventory changes, the economy in a short run equilibrium and in a long nun equilibrium O a may or may not be, is O b. is, is not Oc. is; may or may not be O d. is; is also Starting from a long run equilibrium, if a sudden decrease in household weaith causes a shift in AD, the economy will experience: O a. the same level of prices and lower real GDP in the short run. O b. higher prices and lowerreal GDP in the short nun. O e. lower prices and lower real GDP in the short run. Od. lower prices and the same level of GDP in the short run. Which of the following is NOT one af the reasons for the slow adjustment of input prices? O a. Menu costs Ob. Increased productivity O c. Inventories Od. Long-term contracts

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 61P: Table 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you...

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Startung trom keng run eaillium, itA suditen decrease en houtetd weath cnes a n AD thw coramy wiperience OA the same lee of pnces nd iower real GOP in the short run O higher pnces and lower real ODP the short. nn Oe. lower prles and lwe mal GOPhe shortrun a krwer ces and the same level of oDP n me shot run
Short-run macroeconomic equilibrium is when (Hint: Be careful! Be sure to return to the general definition of equilibrium): Firms have no incentive to change how much they produce O Households have bought as much as they want O Spending is equal to consumption (AE = C) O The government is content with the level of employment
Which of the following will NOT shift the ADTT curve? O a. A rise in consumer confidence O b. A rise in interest rates O c. A rise in government spending O d. A rise in exports
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
Start at long-run equilibrium. Then suppose that AD decreases. What will be the short-term result? O falling prices and a recession O rising prices and a recession O falling prices and an expansion O rising prices and an expansion
Which of the following will NOT shift the ADT curve? O a. A rise in government spending O b. A rise in exports Ос. A rise in interest rates O d. A rise in consumer confidence
Figure 11.2 shows the relationship between the price level and real GDP. Which of the following is the long-run equilibrium point? Figure 11.2 Price level O * O O e 52 V P₁ P₂ P3 0 A point between e* and e" Potential output LRAS e Q3 Q₂ Q₁ SRAS AD AD* AD' Real GDP (trillions of dollars)
The economy has shifted and the quantity of the real GDP supplied has increased. What has potentially happened to aggregate price levels? Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. O Potentially the price levels have decreased to a lower aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have fired some employees as labor has become too expensive.
(Figure: Short- and Long-Run Equilibrlum I) Use Figure: Short- and Long-Run Equlibrium . If the economy le short-run maroeconomio wqbrum tE. appropriate polkcy to retum the economy to potential output would be atn): LRAS price l SRAS AD Real GDP potential output Oa decrease in taxes. Ob increase in government spending. Oc increase in transfer payments. Od. decrease in government spending.
If Aggregate Demand is at AD2, production will be high as possible. Can production stay at this level foever? Price Level Price Level GDP POTENTIAL AD₁ GDP POTENTIAL AS GDP MAX AD₁ AS GDP MAX AD2 GDP AD2 GDP Select one: O a. No, because eventually, higher aggregate demand will raise prices, and this will make some people less willing to do additional work Oc. All of these are true Od. Yes, because this is maximum production e. None of these are true O b. No, because eventually higher aggregate demand will cause prices to fall, and this will make producers decide to produce less
What is your prediction for the economy when you observe that inventories are taking an unplanned dive? You predict that there will be OA. an expansion O B. a trough O C. a business cycle O D. a recession
Consumer Spending increased by 5% last month. Based on this data, which of the following will likely occur in the next 3 -6 months? O GDP will increase O Unemployment will increase O The economy will enter a trough O Stagflation will occur