Exam 11: Aggregate Supply

If the economy were at its potential output level, which of the following would not be true?

Compensation is usually negotiated in terms of a nominal wage because

If resource suppliers and demanders find out that their price expectations were wrong, they will take corrective actions that will

Given the aggregate demand curve, a beneficial supply shock would

Exhibit 11-2 -If the actual price level in Exhibit 11-2 is lower than the expected price level, then

In the long run, but not in the short run,

The amount by which actual output falls short of potential output is called an contractionary gap.

If the inflation rate is 4 percent a year and everyone expected 2 percent a year, then the potential level of real GDP will increase.

Increases in the costs of producing each level of output will cause a rightward shift of the short-run aggregate supply curve.

Suppose that the actual and expected price levels are initially equal, and that the expected price level rises. Which of the following will occur over the long run? (Hint: Recall the actual price level is on the vertical axis.)

When the economy is at its potential output level, which of the following is not true?

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices. Which of the following is true?

Exhibit 11-4 -The graph in Exhibit 11-4 shows a(n)