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

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 ________.

An inflationary output gap implies that

The ʺlong-run aggregate supply curve,ʺ vertical at Y*,shows that

In the long run in the AD/AS macro model we can say that

Which of the following would occur as part of the automatic adjustment process in an economy with a recessionary 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 positive aggregate supply shock shown in the diagram results in a new short -run equilibrium where the price level is ________ and real GDP is ________.

The growth rate of potential output might be decreased by an expansionary fiscal policy if

An inflationary output gap occurs when

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?

A common assumption among macroeconomists is that when real GDP exceeds potential output,factor prices rise and the

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

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 ________.

The curve that is sometimes called the ʺlong-run aggregate supply curveʺ (vertical Y*)relates the aggregate price level to real GDP

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.The government could close the existing output gap by

One advantage of using expansionary fiscal policy rather than relying on automatic adjustment to recover from a recessionary gap is that

Which of the following is a defining assumption of the AD/AS macro model in the long run?

The diagram below shows an AD/AS model for a hypothetical economy.The economy begins in long-run equilibrium at point A. FIGURE 24-3 -Refer to Figure 24-3.A negative shock to the economy shifts the AD curve from AD1 to AD2.The initial effect is

When an economy experiences sustained growth in real GDP,

Which of the following best describes the concept of potential output?

Which of the following is a defining assumption of the AD/AS macro model in the short run?