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

"The level of potential output,Y*,acts like an anchor for the level of real GDP." Which of the following best explains this statement?

In any decision about stimulating the economy with a fiscal expansion (increasing government purchases),the government must weigh the short-run benefits of ________ against the long-run costs of ________.

FIGURE 24-1 Refer to Figure 24-1.Suppose the economy is currently in a short-run equilibrium with output of Y₀.An appropriate fiscal policy response,to attain potential output (Y^*),is

A recessionary output gap implies that

Consider a simple macro model with demand-determined output.Which of the following parameters will produce the largest fluctuations in real GDP from autonomous expenditure shocks?

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.After the positive aggregate supply shock shown in the diagram,which of the following would shift the AS curve leftward during the economy's adjustment process?

Which of the following is occurring as the macro economy is adjusting from the short run to the long run?

Consider the basic AD/AS model,and suppose there is a negative output gap.If an expansionary fiscal policy is pursued and the AS curve shifts right unexpectedly,the fiscal policy may be ________,and real GDP may ________ potential GDP.

Consider the AD/AS macro model.An important asymmetry in the behaviour of aggregate supply is the

Suppose the economy is in macroeconomic equilibrium with real GDP equal to Y*.If the government then implements an expansionary fiscal policy by increasing government purchases,what are the long-run effects on potential output?

Suppose the economy begins in a long-run equilibrium with Y = Y*.A permanent increase in aggregate demand will have its short-run effect on real GDP reversed in the long run with a ________ shift of ________.

FIGURE 24-1 Refer to Figure 24-1.If the economy is currently in a short-run equilibrium at Y₀,the economy is experiencing

The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion. TABLE 24-1 Refer to Table 24-1.Consider Economy E.Which of the following best describes the positions of the aggregate demand and aggregate supply curves in this economy?

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-7 Consider Figure 24-7.At the initial short-run equilibrium,there is ________ output gap of ________.This gap could be closed by a ________.

Which of the following is an important automatic fiscal stabilizer in the Canadian economy?

An inflationary output gap implies that

Automatic fiscal stabilizers are most helpful in

In the basic AD/AS macro model,the "paradox of thrift" is only a short-run phenomenon because

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-7 Refer to Figure 24-7.If the government takes no action to close the existing output gap,then

If the economy in the short run is experiencing a recessionary gap,we are likely to see