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

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.How is the adjustment asymmetry demonstrated when comparing Economy A to Economy E?

Suppose the economy is initially in a long-run macroeconomic equilibrium.A shock then hits the economy and we observe that the unemployment rate decreases and the price level increases.We can conclude that ________ has increased and there is now a(n)________ gap.

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 initial effect of the positive AS shock shown in the diagram results in

How do we define the economy's output gap?

Consider the basic AD/AS macro model in long-run equilibrium.A permanent expansionary AD shock has ________ price-level effect in the short run and ________ price-level effect in the long run.

Which of the following would occur as part of the automatic adjustment process in an economy with a recessionary gap?

An economy may not quickly and automatically eliminate a recessionary output gap because wages

Suppose the following conditions are present in the economy: - firms are facing lower-than normal sales and have reduced output -there is an excess supply of labour and firms are starting to reduce their workforces Which of the following statements describes the adjustment that will happen in the AD/AS macro model?

An inflationary output gap is characterized by