Exam 24: From the Short Run to the Long Run: the Adjustment of Factor Prices

The diagram below shows an AD/AS model for a hypothetical economy.The economy begins in long-run equilibrium at point A. FIGURE 24-4 Refer to Figure 24-4.The positive aggregate supply shock shown in the diagram results in a new short-run equilibrium where the price level is ________ and real GDP is ________.

In the basic AD/AS macro model,which of the following events would cause stagflation?

Consider an economy with a relatively steep AS curve.If there is a shift to the right in the AD curve,there will be a ________ in the price level and ________ in national output.

Consider an AD/AS model in long-run equilibrium.An output gap,caused by a leftward shift of the AD curve,will be eliminated if

Consider the AD/AS model.In the long run,after factor prices have fully adjusted to any output gaps,real GDP

Net tax revenues that rise with national income act as an automatic stabilizer by ________ the marginal propensity to spend and thereby causing the simple multiplier to ________.

Suppose the government had made a decision to change fiscal policy,but it then took nine months to implement a tax reduction.This is an example of

Why does the "paradox of thrift" not exist in the long run? Because

In the long run,aggregate demand is ________ for determining real GDP,and the "paradox of thrift" ________.

Consider the global recession that began in late 2008.In terms of the AD/AS model,which of the following statements best describes the macroeconomic effect on Canada's economy?

FIGURE 24-1 Refer to Figure 24-1.If the economy is currently producing output of Y₀,the economy's automatic adjustment process will have the

Which of the following statements about fiscal policy is the best example of "gross tuning"?

An expansionary fiscal policy that takes the form of an increase in government purchases carries the possibility that private investment ________ and,as a result,the future growth rate of ________.

Given current limitations,fiscal policy as a macroeconomic stabilizer is more defensible the ________ the output gap being suffered,an argument supporting ________.

The diagram below shows an AD/AS model for a hypothetical economy.The economy begins in long-run equilibrium at point A. FIGURE 24-4 Refer to Figure 24-4.Following the positive AS shock shown in the diagram,the adjustment process will take the economy to a long-run equilibrium where the price level is ________ and real GDP is ________.

Suppose Canada's economy is in a long-run equilibrium with real GDP equal to potential output.Now suppose there is a decrease in the Canadian price of all imported raw materials.In the short run,________.In the long run,________.

Suppose the government implements a permanent reduction in the net tax rate in an effort to increase real GDP.One disadvantage of this policy is that

The use of government purchases (G)as a fiscal policy tool can have an effect on long-run growth in the economy.Under what circumstances might an increase in G cause the level of potential output ( )to increase?

Consider an economy with a relatively steep AS curve.If the AD curve shifts to the left,then the price level will ________ and national output will ________.

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-6 Refer to Figure 24-6.If the government takes no action to change the short-run macro equilibrium in this economy,then