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rubyoyster59Lv1

18 Aug 2020

Choose the correct answer for the below question:

If the current Real GDP is less than Natural Real GDP, then the economy is:

a. in long-run equilibrium.

b. in a recessionary gap.

c. in an inflationary gap.

d. possibly in short-run equilibrium.

e. b and d

a. in long-run equilibrium.b. in a recessionary gap.
c. in an inflationary gap.d. possibly in short-run equilibrium.e. b and d

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Richa AroraLv10

23 Sep 2020

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Related questions

1. As prices fall, the value of people's existing assets rises and people increase expenditures. This occurs as a result of the:

a. international effect.

b. interest rate effect.

c. money wealth effect.

d. multiplier effect.

2. An increase in aggregate demand, in the long run, will change:

a. both output and the price level.

b. neither output nor the price level.

c. the price level but not output.

d. output but not the price level.

3. A change in which of the following will shift the long-run aggregate supply curve?

a. The price level

b. Aggregate demand

c. Available resources

d. Sales or excise taxes

4. If potential output exceeds actual output, the economy:

a. is experiencing a recessionary gap.

b. is in neither a short-run nor long-run equilibrium.

c. may be in a long-run equilibrium but is not in short-run equilibrium.

d. is experiencing an inflationary gap.

5. Keynes believed the economy was:

a. always moving toward potential income.

b. always at potential income.

c. always moving away from potential income.

d. fluctuating around potential income.

scarletwalrus565

1) If actual (equilibrium ) real GDP is less than the full-employment, or natural, level of real GDP, then wages and other input prices are expected to:

a. fall and SRAS to shift to the left until long-run equilibrium is achieved.

b. fall and SRAS to shift to the right until long-run equilibrium is achieved.

c. rise and SRAS to shift to the left until long-run equilibrium is achieved.

d. rise and SRAS to shift to the right until long-run equilibrium is achieved.

2) In a self-regulating economy, inflationary gaps are automatically eliminated in the long run by:

a. decreases in wage rates that cause short-run aggregate supply to shift rightward.

b. decreases in wage rates that cause short-run aggregate supply to shift leftward.

c. increases in wage rates that cause short-run aggregate supply to shift rightward.

d. increases in wage rates that cause short-run aggregate supply to shift leftward.

3) Assume the economy is initially in equilibrium at the full-employment level of real GDP. If businesses and consumers become pessimistic regarding future economic conditions, ceteris paribus, the aggregate demand curve will shift to the ________, causing the level of output to ______.

a. left; fall

b. right; fall

c. left; rise

d. right; rise

4) Economists that advocate a macroeconomic policy of laissez-faire:

a. believe the economy is self-regulating only if the government intervenes to move the economy to equilibrium at natural real GDP.

b. believe the economy is self-regulating and will automatically move to equilibrium at natural real GDP in the long run.

c. also advocate central planning and government control of resources.

d. also advocate active government intervention in the economy.

5) Which of the following summarizes the process for closing a recessionary gap if the economy is self-regulating?

a. Labor shortages put upward pressure on wages, which leads to higher costs of production and a decrease in short-run aggregate supply.

b. Labor shortages put downward pressure on wages, which leads to increases in employment and spending and an increase in aggregate demand.

c. Unemployed resources put upward pressure on the price level, which leads to higher wages, increases in spending, and increases in aggregate demand.

d. Unemployed resources put downward pressure on the price level, which leads to lower costs of production and an increase in short-run aggregate supply.

cyanmallard742

Imagine an economy in which consumer expenditure is represented by the following equation:

C=50+.75DI

Imagine also that investors want to spend 500$ at every level of income (I=500$), net exports are zero (X-IM=0), government purchases are 300$, and taxes are 200$

A. What is the Equilibrium price at GDP

B. If the potential GDP is 3000, is there a recessionary or inflationary gap? if so, how much?

C. What will happen to the equilibrium level of GDP if investors become optimistic about the country's future and raise their investment to 600$.

D. After the investment has increased to 600$, is there a recessionary or inflationary gap? How Much?