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<p>List three factors that can change the economy&#8217;s potential output.&#160; What is the impact of shifts of the aggregate demand curve on potential output?&#160; Illustrate your answers with a diagram.</p>

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019

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Chapter 10

3) Answer questions a through f on the basis of the following graph:

If the actual price level exceeds the expected price level reflected in long-term contracts, real GDP equals __________ and the actual price levels equals _________ in the short run.

The situation described in part (a) results in a(n) _________ gap equal to _______.

If the actual price level is lower than the expected price level reflected in long-term contracts, real GDP equals ________ and the actual price level equals _______ in the short run.

The situation described in part (c) results in a(n) ________ gap equal to _______.

If the actual price level equals the expected price level reflected in long-term contracts, real GDP equals _______ and the actual price levels in the short run.

The situation described in part (e) results in a(n) _____gap equal to ______.

5) List three factors that can change the economy’s potential output. What is the impact of shifts of the aggregate demand curve on potential output? What is the impact of shifts of the aggregate demand curve on potential output? Illustrate your answers with a diagram.

6) Give an example of an adverse supply shock and illustrate graphically. Now do the same for a beneficial supply shock.

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