ECON 2H03 Study Guide - Quiz Guide: 2G, Aggregate Demand, Procyclical And Countercyclical
4 Jan 2016
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In your scan sheet, circle a if the statement is true, circle b if the statement is false. Recessionary trend of gdp is associated with higher natural rate of unemployment. Recovery (or expansion) phase is associated with lower natural rate of unemployment. Since private expenditures (c + i) are pro-cyclical, government often pursues counter-cyclical fiscal policy to lessen the severity of recession. Macroeconomic models are used to solve both endogenous and exogenous variables. Answer questions 4-5 on the basis of the following: The aggregate demand (ad) equation of an economy is given below. Y = 2500 2t + 2. 5g + m/p, where y is real gdp, t is real tax, g is the real government expenditure, m is money supply and p is price-level. Assume that t is 1000, g is 1000 and m is 1000. Assume further that the long-run full-employment real gdp (yf) is 4000. The solution of long-run equilibrium price is 1.
