Question 1

Refer to Figure 10.1 for the following questions.
Figure 10.1
 
-Which of the points in Figure 10.1 are possible short-run equilibriums but not long-run equilibriums?

Accepted Answer

The answer of Refer to Figure 10.1 for the following...

Question 2

Refer to Figure 10.1 for the following questions.
Figure 10.1
 
-In Figure 10.1, which of the points are possible long-run equilibriums?

Accepted Answer

In a long-run equilibrium, firms in perfectly competitive markets will operate where average total cost is minimized, which typically corresponds to the lowest point of the average total cost curve. Without seeing Figure 10.1, the correct answer hinges on understanding that long-run equilibrium occurs where price equals the minimum of average total cost, suggesting that points A and C are likely at or near those minima, assuming they represent different market conditions or firms.

Question 3

________ of unemployment during ________ make it easier for workers to ________ wages.

Accepted Answer

When levels of unemployment are high during a recession, there are fewer job opportunities available for workers. This can make it more difficult for workers to negotiate higher wages and can make them more willing to accept lower wages in order to secure employment.

Question 4

Why might the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Accepted Answer

In the long run, workers and firms adjust their expectations of wages and prices based on their experience with past inflation rates. If aggregate demand decreases and leads to a short-run decrease in prices, workers and firms will begin to expect lower wages and prices in the future. This means that they will be willing to accept lower wages and prices in the long run, shifting the short-run aggregate supply curve to the right.

Question 5

Why does the short-run aggregate supply curve shift to the left in the long run, following an increase in aggregate demand?

Accepted Answer

In the long run, as aggregate demand increases, workers and firms adjust their expectations of wages and prices upward due to the higher demand for goods and services and the increased cost of living. This leads to demands for higher wages and prices, which in turn causes the short-run aggregate supply curve to shift to the left as it becomes more costly for firms to produce at the same level.

Question 6

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

Accepted Answer

The automatic mechanism lowers the price level in the case of a recession due to decreased demand, and raises the price level in the case of an expansion due to increased demand.

Question 7

When does long-run macroeconomic equilibrium occur?

Accepted Answer

Long-run macroeconomic equilibrium occurs when aggregate demand equals the long-run aggregate supply, which is vertical and represents the economy's potential output. In the short run, the aggregate supply curve can shift due to changes in input prices or productivity, causing output to deviate from potential. However, in the long run, those changes are reflected in higher or lower input prices, and the aggregate supply curve shifts back to its original position. The point where aggregate demand intersects the long-run aggregate supply curve is the economy's potential output, and when it also intersects the short-run aggregate supply, it indicates that the economy is producing at its potential with stable prices.

Question 8

Refer to Figure 10.1 for the following questions.
Figure 10.1
 
-Suppose the economy is at point C in Figure 10.1. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

Accepted Answer

If government spending decreases from point C, it will shift the aggregate demand curve inward, causing the equilibrium output and price level to decrease. This movement will continue until the economy reaches the long-run equilibrium at point A, where the aggregate supply curve intersects with the new aggregate demand curve. At this point, both the price level and output will return to their natural long-run levels.

Question 9

Outline and explain the factors that shift the aggregate demand curve and the short-run and long-run aggregate supply curves.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Outline and explain the factors that shift...

Question 10

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. In the short run:

Accepted Answer

When firms become more optimistic about future profitability, they are likely to invest more. This increase in investment raises aggregate demand, which, in a full employment economy, can lead to higher output and potentially lower unemployment in the short run as firms hire more workers to meet the increased demand.

Question 11

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Accepted Answer

When the economy is above potential GDP, it is operating beyond its sustainable capacity, leading to upward pressure on prices and wages. This causes the short-run aggregate supply to shift to the left, reducing output back to potential GDP.

Question 12

Refer to Figure 10.1 for the following questions.
Figure 10.1
 
-Suppose the economy is at point A in Figure 10.1. If consumer spending increases in the economy, where will the eventual long-run equilibrium be?

Accepted Answer

An increase in consumer spending boosts aggregate demand, shifting the demand curve to the right. In the long run, this leads to a new equilibrium at a higher price level and output, corresponding to point C in a typical aggregate demand and supply model.

Question 13

Explain how each of the following events would affect the long-run aggregate supply curve.
a.A lower price level.
b.A decrease in the labour force.
c.A decrease in the quantity of capital goods.
d.Technological change.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Explain how each of the following events...

Question 14

An increase in aggregate demand causes an increase in ________ only in the short run, but causes an increase in ________ in both the short run and the long run.

Accepted Answer

The answer of An increase in aggregate demand causes an...

Question 15

What variables will shift the short-run aggregate supply curve?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of What variables will shift the short-run aggregate...

Question 16

Because of a supply shock, in the short-run:

Accepted Answer

A supply shock causes a decrease in aggregate supply, which shifts the aggregate supply curve to the left. This results in a decrease in real GDP and an increase in the price level in the short-run. Unemployment may or may not be affected, depending on the specific nature of the supply shock.

Question 17

When does short-run macroeconomic equilibrium occur?

Accepted Answer

Short-run macroeconomic equilibrium occurs when aggregate demand and short-run supply intersect. This is because in the short-run, prices are sticky and do not adjust immediately to changes in demand or supply. Therefore, when aggregate demand intersects with short-run supply, it indicates that the economy is producing at a level where output and prices are stable in the short-run. The other options are not correct because short-run equilibrium does not necessarily require a constant price level, and it does not have to lie on the long-run supply curve. However, in the long-run, equilibrium will occur when both AD and SRAS intersect AND the equilibrium lies on the long-run supply curve.

Question 18

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Accepted Answer

The automatic mechanism through which the economy adjusts to long-run equilibrium is called the self-correcting mechanism. This mechanism involves a rightward shift in short-run aggregate supply after a recession, which leads to lower prices and a return to full employment in the long-run. Option A and C both involve leftward shifts, which would further delay the return to equilibrium, and option D involves a rightward shift in aggregate demand which is not a part of the self-correcting mechanism.

Question 19

Explain how each of the following events would affect the short-run aggregate supply curve.
a.A decrease in the price level.
b.A decrease in what the price level is expected to be in the future.
c.A price level that is currently lower than expected.
d.An unexpected decrease in the price of an important raw material.
e.A decrease in the labour force.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Explain how each of the following events...

Question 20

Why does the short-run aggregate supply (SRAS)curve slope upward?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Why does the short-run aggregate supply (SRAS)curve...

Quiz 10: Aggregate Demand and Aggregate Supply Analysis

Refer to Figure 10.1 for the following questions. Figure 10.1 -Which of the points in Figure 10.1 are possible short-run equilibriums but not long-run equilibriums?

Refer to Figure 10.1 for the following questions. Figure 10.1 -In Figure 10.1, which of the points are possible long-run equilibriums?

of unemployment during make it easier for workers to wages.

Why might the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Why does the short-run aggregate supply curve shift to the left in the long run, following an increase in aggregate demand?

The automatic mechanism the price level in the case of and the price level in the case of .

When does long-run macroeconomic equilibrium occur?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Suppose the economy is at point C in Figure 10.1. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

Outline and explain the factors that shift the aggregate demand curve and the short-run and long-run aggregate supply curves. _ _

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. In the short run:

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Suppose the economy is at point A in Figure 10.1. If consumer spending increases in the economy, where will the eventual long-run equilibrium be?

Explain how each of the following events would affect the long-run aggregate supply curve. a.A lower price level. b.A decrease in the labour force. c.A decrease in the quantity of capital goods. d.Technological change. _ _

An increase in aggregate demand causes an increase in only in the short run, but causes an increase in in both the short run and the long run.

What variables will shift the short-run aggregate supply curve? _ _

Because of a supply shock, in the short-run:

When does short-run macroeconomic equilibrium occur?

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Why does the short-run aggregate supply (SRAS)curve slope upward? _ _

Quiz 10: Aggregate Demand and Aggregate Supply Analysis

Refer to Figure 10.1 for the following questions. Figure 10.1 -Which of the points in Figure 10.1 are possible short-run equilibriums but not long-run equilibriums?

Refer to Figure 10.1 for the following questions. Figure 10.1 -In Figure 10.1, which of the points are possible long-run equilibriums?

________ of unemployment during ________ make it easier for workers to ________ wages.

Why might the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Why does the short-run aggregate supply curve shift to the left in the long run, following an increase in aggregate demand?

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

When does long-run macroeconomic equilibrium occur?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Suppose the economy is at point C in Figure 10.1. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. In the short run:

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Suppose the economy is at point A in Figure 10.1. If consumer spending increases in the economy, where will the eventual long-run equilibrium be?

An increase in aggregate demand causes an increase in ________ only in the short run, but causes an increase in ________ in both the short run and the long run.

What variables will shift the short-run aggregate supply curve? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Because of a supply shock, in the short-run:

When does short-run macroeconomic equilibrium occur?

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Why does the short-run aggregate supply (SRAS)curve slope upward? _____________________________________________________________________________________________ _____________________________________________________________________________________________

of unemployment during make it easier for workers to wages.

The automatic mechanism the price level in the case of and the price level in the case of .

An increase in aggregate demand causes an increase in only in the short run, but causes an increase in in both the short run and the long run.

What variables will shift the short-run aggregate supply curve? _ _

Why does the short-run aggregate supply (SRAS)curve slope upward? _ _