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13 Dec 2019

Suppose the government increases aggregate demand to a level that increases GDP above its long-run equilibrium level. What sequence of events would follow? A)price rise; GDP increases; workers demand higher wages; short-run aggregate supply shifts to the left; GDP drops b) Prices fall; workers receive lower wages; shor-run aggregate supply shifts to the right; GDP rises c) Prices rise; GDP increases; workers demand higher wages; long-run aggregate supply shifts to the left; GDP falls d) Prices fall; workers receive lower wages; aggregate supply shifts to the right; GDP rises

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Lelia Lubowitz
Lelia LubowitzLv2
17 Dec 2019
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Related questions


1. In economy A, all workers agree in advance on the nominal wages that their employers will pay them. In economy B, half of all workers have these nominal wage contracts. In contrast, the other half have indexed employment contracts, so their wages rise and fall automatically with the price level.

A. According to the sticky-wage theory of aggregate supply, which economy has a more steeply sloped short-run aggregate-supply curve?
B. In which economy would a 5 percent increase in the money supply have a larger impact on output in the short run?
C. In which economy would it have a larger impact on the price level in the short run?

2. When output rises, unemployment falls.

a. TRUE Ā 
b. FALSE Ā 
Ā 
3. How do prices change due to an economic contraction that is caused by a shift in aggregate demand?
Ā  A. They rise in the short run and fall back to their original level in the long run. Ā 
Ā  B. They rise in the short run and rise even more in the long run. Ā 
Ā  C. They fall in the short run and rise back to their original level in the long run. Ā 
Ā  D. They fall in the short run and fall even more in the long run.

4. What happens to sales and profit during recessions?
Ā  A. sales rise and profits fall Ā 
Ā  B. profits fall and sales rise Ā 
Ā  C. sales and profits fall Ā 
Ā  D. sales and profits rise
5. Which of the following explains why production rises in most years?
Ā  A. increases in prices of goods and services Ā 
Ā  B. increases in stock prices Ā 
Ā  C. aging population Ā 
Ā  D. technological innovation Ā 




Ā 

Suppose an economy is in long-run equilibrium. The central bank raises the money supply by 5 percent. what causes the economy to move from its short-run equilibrium to its long-run equilibrium?

1. The government increases taxes to curb aggregate demand.

2. Nominal wages, prices, and perceptions adjust upward to this new price level.

3. The government increases spending to increase aggregate demand.

4. Nominal wages, prices, and perceptions adjust downward to this new price level.

A. A decrease in aggregate supply can result in:

  1. a recession
  2. cost-push inflation
  3. demand-pull inflation
  4. unemploymentĀ 

B. In the short run (intermediate-range) of the aggregate supply curve, higher aggregate demand will increase

  1. the price level but reduce real GDP.
  2. real GDP without raising the price level
  3. the price level without affecting real GDP
  4. both the price level and real GDP

C. Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

  1. As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services
  2. As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
  3. As prices fall, the government will have to reduce taxes, which will lead to an increase in the number of goods and services purchased
  4. As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the number of goods and services purchased

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