If the economy begins at long-run equilibrium at potential output when a negative aggregate demand shock...
If the economy begins at long-run equilibrium at potential output when a negative aggregate demand shock occurs,l initially there will be a ____________________ equilibrium because prices are _____________ in the short run.
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a. |
new long-run equilibrium below potential output, sticky |
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|
b. |
new short-run equilibrium below potential output, sticky |
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|
c. |
new short-run equilibrium above potential output, sticky |
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|
d. |
new short-run equilibrium below potential output, flexible |
Homework Answers
There will be a new short run equilibrium where the short run aggregate supply and aggregate demand(with negative shock) with intersect.This is because prices are rigid in the short run.
Answer-B
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If the economy begins at long-run equilibrium at potential
output when a negative aggregate demand shock...
If the economy begins at long-run equilibrium at potential output when a negative aggregate demand shock occurs, l initi...
If the economy begins at long-run equilibrium at potential output when a negative aggregate demand shock occurs, l initially there will be a ____________________ equilibrium because prices are _____________ in the short run. a. new long-run equilibrium below potential output, sticky b.new short-run equilibrium below potential output, sticky c.new short-run equilibrium above potential output, sticky d.new short-run equilibrium below potential output, flexible
Using aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves
Question 1: AD-SRAS-LRAS Model Using aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves, graphically illustrate the effect of an increase in the money supply on output and prices in the short and long run. Assume that the economy is initially in long run equilibrium at the potential output level and prices are fixed in the short-run. In your graph, label "A" for the initial equilibrium, "B' for the short-run equilibrium, and "C" for the long-run equilibrium.
IV. Suppose an economy is in long run equilibrium. (a) Use the model of aggregate demand...
IV. Suppose an economy is in long run equilibrium. (a) Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium on a BIG and clearly labeled graph. Label the equilibrium point A. Be sure to include the short-run and long-run aggregate supply. (b) Household spending increases. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (label it point B) (c)...
Consider the aggregate demand – aggregate supply (AD-AS) model. Assume the economy is initially at its...
Consider the aggregate demand – aggregate supply (AD-AS) model. Assume the economy is initially at its long-run equilibrium. Produce a new graph, draw the aggregated demand curve, short-run aggregate supply curve, and the long-run aggregate supply curve and label the curves. Label both the horizonal and vertical axes clearly. Label the long-run equilibrium as A and its corresponding output level as Y1 Now assume a positive supply shock hits the economy. In the graph, show the short-run effects of this...
2.When a negative aggregate demand shock occurs and creates a short-run recessionary equilibrium, a. eventually...
2.When a negative aggregate demand shock occurs and creates a short-run recessionary equilibrium, a. eventually wages and prices will fall and move the economy back to potential output b. the government could increase spending and/or lower taxes to move the economy back toward potential output c. the Federal Reserve could lower interest rates to move the economy back toward potential output d. all of the above 3. If the unemployment rate were 6% and the Federal Reserve believed that structural...
A supply shock causes a shift in: a. long-run aggregate supply. b. aggregate demand. c. short-run and long-run aggregat...
A supply shock causes a shift in:
a. long-run aggregate supply.
b. aggregate demand.
c. short-run and long-run aggregate supply.
d. short-run aggregate supply.
e. aggregate demand and short-run aggregate supply.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. The economy would be moving to long-run
equilibrium if it started at
a. A and moved to B.
b. C and moved to B.
c. D and moved to C.
d. None of the above...
Beginning with long-run equilibrium, use the aggregate demand and aggregate supply model to illustrate what happens...
Beginning with long-run equilibrium, use the aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a negative supply shock. (10 points)
1. Which of the following is not a property of the aggregate demand curve? It shows...
1. Which of the following is not a property of the aggregate demand curve? It shows the relationship between the overall price level and level consumption. It shows the price level on the vertical axis and output on the horizontal axis. The aggregate demand curve slopes downward. It shows the relationship between the overall price level and the level of total demand. 2. When the price level increases people: feel more wealthy. have the same real value of assets, regardless...
The following figure depicts the aggregate demand (AD), theshort-run aggregate supply (SRAS), and the long-run...
The following figure depicts the aggregate demand (AD), the
short-run aggregate supply (SRAS), and the long-run aggregate
supply (LRAS) curves for an economy. The economy is initially at
long-run equilibrium, at point A. Suppose that there is an increase
in the amount of investment in the economy due to a reduction in
the real interest rate. This increase in investment shifts the AD
curve to the right, depicted below in the movement of the economy
from point A to point...
The figure below depicts the aggregate demand curve (AD) and the long-run aggregate supply curve (LRAS) for the United States. The economy is initially at long-run equilibrium, at point A.
The figure below depicts the aggregate demand curve (AD) and the long-run aggregate supply curve (LRAS) for the United States. The economy is initially at long-run equilibrium, at point A.One of the most contentious issues among economists involves the economy’s adjustment to long-run equilibrium. Some economists believe that adjustment can and should occur naturally. This group, the classical economists, stresses the importance of aggregate supply. Others see the return to long-run equilibrium as an adjustment that occurs unpredictably and often...
IV. Suppose an economy is in long run equilibrium. (a) Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium on a BIG and clearly labeled graph. Label the equilibrium point A. Be sure to include the short-run and long-run aggregate supply. (b) Household spending increases. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (label it point B) (c)...
A supply shock causes a shift in:
a. long-run aggregate supply.
b. aggregate demand.
c. short-run and long-run aggregate supply.
d. short-run aggregate supply.
e. aggregate demand and short-run aggregate supply.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. The economy would be moving to long-run
equilibrium if it started at
a. A and moved to B.
b. C and moved to B.
c. D and moved to C.
d. None of the above...
The following figure depicts the aggregate demand (AD), the
short-run aggregate supply (SRAS), and the long-run aggregate
supply (LRAS) curves for an economy. The economy is initially at
long-run equilibrium, at point A. Suppose that there is an increase
in the amount of investment in the economy due to a reduction in
the real interest rate. This increase in investment shifts the AD
curve to the right, depicted below in the movement of the economy
from point A to point...
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