Question

Describe three types of short-run macroeconomic equilibrium.

 Describe three types of short-run macroeconomic equilibrium.

image.png

 A macroeconomic equilibrium in which real GDP is less than potential GDP is _______  equilibrium.

 And one in which real GDP equals potential GDP is _______  equlibrium.

 A. a below full-employment, a full-employment

 B. a full-employment, a below full-employment

 C. a full-employment, an inflationary

 D. a below full-employment, a recessionary

 The graph shows an economy's long-run aggregate supply curve.

 The economy is at an above full-employment equilibrium.

 Draw an aggregate demand curve and a short-run aggregate supply curve. Label them.



 In the graph, the initially the aggregate supply curve is SAS0 and the aggregate demand curve is AD0

image.png

 Some events change aggregate demand from AD0 to AD1 Describe two events that could have created this change in aggregate demand.

 What is the equilibrium after aggregate demand changed?

 If potential GDP is unchanged, the economy is at what type of macreeconomic equilibrium?

 Some events that could have changed aggregate demand from AD0 to ADare _______ 

 A. a decrease in expected future inflation or an increase in interest rates

 B. an increase in the quantity of money or a decrease in expected future Inflation

 C. a decrease in expected future inflation or an increase in expected future income

 D. an increase in the quantity of money or an increase in expected future income



 In the graph, the initially the aggregate supply curve is SAS0 and the aggregate demand curve is AD0

image.png

 Some events change aggregate demand from AD0 to AD1 Describe two events that could have created this change in aggregate demand.

 What is the equilibrium after aggregate demand changed?

 If potential GDP is unchanged, the economy is at what type of macroeconomic equilibrium?

 Following the change in aggregate demand, the new equilibrium is at A. point A

 B. point B

 C. point C

 D. point D

 If potential GDP is unchanged, the economy has moved to _______  equilibrium.

 A. a full-employment



 In the graph, the initially the aggregate supply curve is SAS0 and the aggregate demand curve is AD0

image.png

 Some events change aggregate demand from AD0 to AD1 Describe two events that could have created this change in aggregate demand.

 What is the equilibrium after aggregate demand changed?

 If potential GDP is unchanged, the economy is at what type of macroeconomic equilibrium?

 B. point B

 C. point C

 D. point D

 If potential GDP is unchanged, the economy has moved to _______  equilibrium.

  A. a full-employment

  B. an above full-employment

  C. a below full-employment


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Answer #1

Question 1)

A) a below full employment , full employment

Question 2)

D) Increase in quantity of money or increase in expected future income

Increase in money supply decreases the interest rate which further cuases increase in demand and shifts AD, increase in expected future income cause increase in consumption which shifts AD

Question 3)

C) Point C

The new equilibirum after just the shift of AD comes at point C where aggregate supply is still at SAS0

Question 4)

B) above full employment equlibrium

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Answer #2

1. Option A is correct.

When real GDP < potential GDP => below full employment equilibrium.

When real GDP = potential GDP => full employment equilibrium.

2.

3. Option D is correct.

Both increase in quantity of money and expected future income shifts the AD curve out to the right.

4. Option C is correct.

Equilibrium is at a point where the SAS0 intersects AD1.

5. Option B is correct.

The equilibrium is higher than the potential level of equilibrium.

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