Q3. When the economy is at full capacity: A. The economy is at less than full potential employment, and inflation may rise B. The economy is at full potential GDP, and inflation may fall C. The economy is at less than full potential employment, and inflation could rise or fall. D. The economy is at full potential GDP, and infiation may rise 9. If output is greater that full potential (full employment) output: A) A recessionary gap may result B) An unemployment gap will result C) A deflationary gap may result D) An inflationary gap may result

Q3. When the economy is at full capacity: A. The economy is at less than full potential employment, and inflation may rise B. The economy is at full potential GDP, and inflation may fall C. The economy is at less than full potential employment, and inflation could rise or fall. D. The economy is at full potential GDP, and infiation may rise 9. If output is greater that full potential (full employment) output: A) A recessionary gap may result B) An unemployment gap will result C) A deflationary gap may result D) An inflationary gap may result

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 53CTQ: The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both...

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35 When a recessionary gap exists, actual output______ potential output and the rate of inflation will tend to ____. a. is less than; decrease b. is less than; increase c. exceeds; decrease d.equals; remain the same e.exceeds; increase
VII. Assume that the economy starts at the natural level of output. Now suppose there is a decline in business confidence, so that investment demand falls for any interest rate. a. In an AD-AS diagram, show what happens to output and the price level in the short run and the medium run. b. What happens to the unemployment rate in the short run and in the medium run?
Choose the correct sequence of events that might bring an economy to full employment if it is currently at a level of real GDP above the potential level of GDP. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a b FEN.06 Homework Unanswered. Due Mar 17th, 11:59 PM C d price level goes up, lowering wages and increasing output price level goes up, increasing wages as well as output wages rise, increasing prices and decreasing output wages fall, decreasing prices as well as output
Suppose the economy is in long-run equilibrium. If there is a sharp increase in the price of a critically important resource that is used in an economy such as oil and higher expected inflation while, at the same time, consumers become increasingly confident about their employment prospects and businesses more optimistic regarding the profitability of their investments, then we would expect that in the short-run, A. the price level will fall, and real GDP might rise, fall, or stay the same B. real GDP will fall and the price level might rise, fall, or stay the same. C. the price level will rise, and real GDP might rise, fall, or stay the same. D. real GDP will rise and the price level might rise, fall, or stay the same.
4. The long-run Phillips curve This graph shows the long-run Phillips curve (LRPC) and several of the short-run Phillips curves (PC) for an economy. INFLATION RATE (Percent) 12 PC PC PC LRPC 15 1 21 3 B + D E +° + +2 G + 5 6 UNEMPLOYMENT RATE (Percent) ? Assume that the economy is initially at point E, with an expected and actual rate of inflation of 6% and an unemployment rate of 5%. Which of the following events could lead the economy to move to point H in the short run? The government increases spending. O Consumption spending rises. Net exports increase. The Fed raises interest rates. Which of the following statements would best explain a move from point H to point G? Nominal wages are renegotiated at the lower inflation rate of 3%, leading to an increase in employment. The government pursues a contractionary monetary policy.
In the medium run, if government purchases are increased and nominal money supply is decreased, we can expect that a. the interest rate will increase while aggregate demand and prices may increase, decrease, or remain the same b. aggregate demand and prices will increase but interest rates will not change c. aggregate demand and interest rates will decrease but prices will increase d. aggregate demand, prices, and the interest rate will all decrease e. the AD-curve will shift to the right and the AS-curve will shift to the left
Pick 1 answer for each. 3. When the economy is at full capacity: A) The economy is at less than full potential employment, and inflation may rise B) The economy is at full potential GDP, and inflation may fall C) The economy is at less than full potential employment, and inflation could rise or fall. D) The economy is at full potential GDP, and inflation may rise 9. If output is greater that full potential (full employment) output: A) A recessionary gap may result B) An unemployment gap will result C) A deflationary gap may result D) An inflationary gap may result.
What is the effect of a rise in the money wage rate when the economy is at potential GDP? A rise in the money wage rate when the economy is at potential GDP A. does not change potential GDP but increases real GDP along the AS curve. B. decreases potential GDP because the full-employment quantity of labor decreases C. does not change aggregate supply but decreases production D. decreases aggregate supply because a rise in the money wage rate increases costs, so firms employ fewer workers Click to select your answer.
2. Explaining short-run economic fluctuations A majority of economists believe that in the long run, real economic variables and nominal economic variables behave independently of one another. For example, an increase in the money supply, a (real/nominal) variable, will cause the price level, a (real/nominal) variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a (real/nominal) variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as (price neutrality/monetary neutrality/the quantitiy theory). However, in the short run, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggregate supply (AS)…
According to the Keynesian framework, ____________ in _______________ may cause inflation, but not a recession. a. decrease; interest rates b. an increase; domestic spending c. a decrease; a major trading partner's economy d. a decrease; a mayor trading partner's export prices I believe the correct answer is the increase in domestic spending because it will cause inflation but will shift AD to the right. What do you think?
Refer to Figure. If the economy starts at c and 1, then in the short run, where does a decrease in taxes move the economy? Price Level d and 2 e and 3 a and 3 b and 2 C Output Inflation Rate 2 3 Unemployment
36 The self-correcting tendency of the economy means that recessionary gaps are eventually eliminated by: a. rising inflation b.increasing potential output c.government policy. d.decreasing potential output. e. falling inflation.