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

FIGURE 24-1 -Refer to Figure 24-1.If the economy is currently in a short-run equilibrium at Y₀,the economy is experiencing

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.Following the positive AS shock shown in the diagram,the adjustment process will take the economy to a long-run equilibrium where the price level is ________ and real GDP is ________.

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

Suppose the economy begins in a long-run equilibrium with Y = Y*.A permanent increase in aggregate demand will have its short-run effect on real GDP reversed in the long run with a ________ shift of ________.

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 explains why wages are rising in Economy E?

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-6 -Refer to Figure 24-6.In the initial short-run equilibrium,there is ________ output gap of ________ but this gap could be closed by a ________.

In the basic AD/AS macro model,permanent increases in real GDP are possible only if

The Phillips curve describes the relationship between

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.After the positive aggregate supply shock shown in the diagram,which of the following would shift the AS curve leftward during the economy's adjustment process?

Suppose the government had made a decision to change fiscal policy,but it then took nine months to implement a tax reduction.This is an example of

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

Income taxes in Canada can be considered to be automatic stabilizers because tax

Consider the AD/AS model after factor prices have fully adjusted to output gaps.A reduction in the level of potential output,with aggregate demand constant,will

In our macro model,the level of aggregate output is determined in the short run by ________ but in the long run by the level of ________.

In the long run,aggregate demand is ________ for determining real GDP,and the paradox of thrift ________.

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-6 -Refer to Figure 24-6.The government could close the existing output gap by

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

Which of the following are the defining assumptions of the short run in macroeconomics?

A common assumption among macroeconomists is that when real GDP is less than potential output,factor prices adjust and the

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 Canada's economy?