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

Consider the simplest macro model with demand-determined output. Other things being equal, the ________the value of the simple multiplier, the ________ stable is real GDP in response to shocks to autonomous spending.

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.

FIGURE 24-5 -Refer to Figure 24-5.If the economy is currently in equilibrium at E3,the concept of asymmetrical adjustment of the AS curve suggests that

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.Which of the following statements best describes the situation facing Economy B?

Consider the AD/AS model,and suppose that the economy begins at potential output.The effect of a positive AS shock on real GDP will be reversed in the long run with a ________ shift in ________.