Log in
HomeTextbook Notes300,000CA170,000

ECON102 Chapter Notes - Chapter 26: Excess Supply, Monetarism, New Keynesian Economics

53 views6 pages
OC2146671
24 Oct 2017
School
University of Waterloo
Department
Economics
Course
ECON102
Professor
Maryann Vaughan

For unlimited access to Textbook Notes, a Class+ subscription is required.

apricotcaribou323 and 20 others unlocked
ECON102 Full Course Notes
19
ECON102 Full Course Notes
Verified Note
19 documents

Document Summary

Labour market can be at full employment, above full employment, or below full employment: aggregate supply is the relationship between quantity of real gdp supplied and the price level. Las: when all prices rise, the price level rises. If the price level rises and the money wage rate and other factor prices remain constant, firms increase production and quantity of real gdp supplied increases. An economy that has a greater quantity of labour employed has greater potential gdp. Potential gdp only increases if the full-employment quantity of labour increases: not changes in potential gdp and las. Fluctuations in employment in the business cycle result in fluctuations in real gdp: an increase in the quantity of capital. The larger the quantity of capital, the more productive is the labour force and the greater the potential gdp. Capital includes human capital, skills that people have acquired in school and ojt: an advance in technology.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Questions

The aggregate demand curve illustrates the relationship between

a. the price level and the potential demand for real GDP.

b. the price level and the potential quantity demanded of real GDP.

c. the price level and the number of goods supplied by firms.

d. the price level and the quantity of goods demanded by households, firms, government, and foreigners.

1. In the long run, when prices are perfectly flexible:

a. aggregate supply is vertical and a market economy is self-correcting.

b. a market economy cannot self-correct.

c. government will be required to set prices to maintain equilibrium.

d. changes in aggregate demand cause equilibrium real GDP to change.

 

2. An increase in household wealth when the SRAS curve is upward sloping:

a. leads to an increase in the price level but has no impact on real GDP

b. has no impact on the price level but leads to an increase in real GDP

c. leads to an increase in both the price level and real GDP

d. has no impact on the price level or real GDP

 

3. In the long run, continued increases in aggregate demand not matched by similar increases in aggregate supply will cause:

a. an increase in the full-employment level of real GDP

b. a recessionary gap

c. a decrease in the price level

d. an increase in the price level

 

4. The vertical long-run aggregate supply curve implies that:

a. changes in aggregate demand will not affect the price level

b. the short-run aggregate supply curve is also vertical

c. natural or full-employment real GDP does not depend on the price level, in the long run

d. natural or full-employment real GDP is the same as the equilibrium real GDP in the short run

 

5. A rightward shift of the long-run aggregate supply curve illustrates:

a. economic growth

b. a recessionary gap

c. an inflationary gap

d. a decrease in natural real GDP

 

6. When the economy is in a recessionary gap

a. there is a surplus of labor

b. there is a shortage of labor

c. it is producing a real GDP level that is greater than natural real GDP

d. the unemployment rate is less than the natural unemployment rate

 

7. If the actual unemployment rate is less than the natural unemployment rate:

a. a recessionary gap exists and wages are likely to rise

b. an inflationary gap exists and wages are likely to rise

c. a recessionary gap exists and wages are likely to fall

d. an inflationary gap exists and wages are likely to fall

 

8. An economy in long-run equilibrium is producing:

a. a level of real GDP that is greater than its natural real GDP

b. where both the price level and real output are maximized

c. a level of real GDP equal to its natural real GDP

d. in the vertical range of aggregate demand.

 

1. Discuss the difference between an increase in the aggregate demand curve and an increase in the quantity of real GDP demanded. Include a discussion of how the price level relates to each event.

2. What are the major factors that determine investment, and what impact does each have on aggregate demand?

3. Describe the difference between a microeconomic demand curve and an aggregate demand curve.

4. The aggregate demand curve portrays the relationship between the price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

5. Explain how changes in the stock of capital affect aggregate supply.

6. What is the natural level of output?