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

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 Canadaʹs economy?

When we study the adjustment process in macroeconomics, we are analyzing the process by which

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 economies is operating at its long -run equilibrium?

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

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

FIGURE 24-2 -Refer to Figure 24-2. Suppose the economy is in a short-run equilibrium at Y1. A contractionary fiscal policy would restore the economy to potential output Y*) by shifting the

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

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 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.

What is sometimes called the ʺlong-run aggregate supply curveʺ shows the relationship between the price level and aggregate supply over a time period long enough to permit

A reduction in the net tax rate might lead to an increase in the growth rate of potential output if

The Phillips curve provides a theoretical link between

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 -Suppose the following conditions are present in the economy: - firms are increasing output to meet strong demand for their goods - workers are able to demand higher wages as firms try to bid workers away from other firms Which of the following statements describes the adjustment that will happen in the AD/AS macro model?

An inflationary output gap is characterized by

FIGURE 24-1 -Refer to Figure 24-1. If the economy is currently producing output of Y0 and the government initiates an expansionary fiscal policy adequate to close the output gap, the result is intended to be

FIGURE 24-2 -Refer to Figure 24-2. Suppose the economy is in equilibrium at Y1. The economyʹs automatic adjustment process will restore potential output, Y*, through

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.

As a global recession began in late 2008, the governments of all major economies searched for policy responses to dampen the effects of the recession. In general, governments were aiming to

The study of the long run in macroeconomics focuses

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