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2 Mar 2018

1. if the economy is at equilibrium on AD2, policies that increase AD will

a. increase prices, but not real GDP

b. increase prices and increase real GDP

c. Decrease prices and real GDP

d. have no effect on the price level

2. if the economy is at equilibrium on AD4, the best policy for maintaining full employment would be

a. contractionary policies to decrease AD

b. expansionary policies to increase AD

c. increase governmnet spending

d. do nothing to change AD

3. one of the macroeconomic goals is full employment, which economist equate to an unemployment rate of

a. 0% b. 1% c. 5% d. 100%

4. when foreign nations lower the value of their ecurrency relative to the US exports become ________ expensive and will cause US GDP to _______, ceteris paribus.

a. More, rise

b. Less, rise

c. More, fall

d. Less, fall

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Jean Keeling
Jean KeelingLv2
5 Mar 2018
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Related textbook solutions

Principles of Economics
2nd Edition, 2017
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ISBN: 9781947172364
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Related questions

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.

 

Illustrate how each of the following events would shift the AS schedule and potential Real GDP, thereby altering equilibrium prices and output levels in the economy. Use an aggregate supply-aggregate demand diagram in your explanation and assume that the economy is initially at full employment.

Note: Although some of the events listed below will also shift AD conditions in the economy, you do not need to show AD shifts in answering this question.

a) an increase in the general level of money wages

b) an increase in the price of imported oil and related energy products.

c) a decrease in the level of US interest rates

d) an increase in the productivity of labor

e) an increase in the expected inflation rate

f) an increase in the labor force growth rate

Illustrate how each of the following events would shift the AS schedule and potential Real GDP, thereby altering equilibrium prices and output levels in the economy. Use an aggregate supply-aggregate demand diagram in your explanation and assume that the economy is initially at full employment.

Note: Although some of the events listed below will also shift AD conditions in the economy, you do not need to show AD shifts in answering this question.

a) an increase in the general level of money wages

b) an increase in the price of imported oil and related energy products.

c) a decrease in the level of US interest rates

d) an increase in the productivity of labor

e) an increase in the expected inflation rate

f) an increase in the labor force growth rate

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