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

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

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

Which of the following statements about output gaps is true?

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.

Fiscal policies typically affect the short-run level of GDP because they cause shifts in the ________ but they will not generally have any long-run effects on real GDP unless they affect ________.

What economists sometimes call the "long-run aggregate supply curve" is

The economy's output gap is defined as the

The study of the long run in macroeconomics focuses

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 ________.

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

The "long-run aggregate supply curve," vertical at Y^*,shows that

In the basic AD/AS macro model,which of the following events could cause a negative AS shock?

FIGURE 24-1 -Refer to Figure 24-1.Suppose the economy is currently in a short-run equilibrium with output of Y₀.An appropriate fiscal policy response,to attain potential output (Y^*),is

Suppose Canada's 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,________.

If wages rise faster than increases in labour productivity,then unit labour costs will

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 ________.

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 decreases.We can conclude that ________ has decreased and there is now a(n)________ gap.

Consider the AD/AS macro model.The main source of increases in material living standards over the long term is the

If the economy is experiencing an inflationary output gap,the adjustment process operates as follows:

FIGURE 24-2 -Refer to Figure 24-2.Suppose the economy is in a short-run equilibrium at Y₁.An appropriate fiscal policy for closing the output gap is