Question 1

In a self-correcting model of the economy,recessionary gaps are eventually eliminated by

Accepted Answer

In a self-correcting model, recessionary gaps are eliminated as falling inflation leads to lower real interest rates, which stimulates investment and consumption, eventually bringing the economy back to full employment.

Question 2

_________ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point ________ to long-run equilibrium at point ________,

Accepted Answer

The answer of _________ inflation will eventually move the economy...

Question 3

In a self-correcting model of the economy,expansionary gaps are eventually eliminated by

Accepted Answer

In a self-correcting economy, expansionary gaps are eliminated as rising inflation leads to higher real interest rates, which dampens spending and investment, eventually bringing the economy back to potential output.

Question 4

-The economy pictured in the diagram above has a(n)________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.

Accepted Answer

The economy is below full employment, so there is a recessionary gap. The short-run equilibrium combination of inflation and output is indicated by point A.

Question 5

At long-run equilibrium,inflation ___________ and actual output is equal to __________.

Accepted Answer

In the long-run equilibrium, inflation is stable and the actual output is equal to potential output, which is the level of output the economy can sustain over the long term without generating inflationary pressure.

Question 6

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point ________.The long-run equilibrium combination of inflation and output for this economy is indicated by point ________.

Accepted Answer

In the short-run, the economy can be at a point where inflation and output are not at their natural levels, such as point A. In the long-run, the economy tends to move towards its natural levels of inflation and output, which is indicated by point C.

Question 7

At short-run equilibrium,inflation ___________ and actual output is equal to __________.

Accepted Answer

At short-run equilibrium, inflation is determined by past pricing decisions and expectations, and actual output is equal to the level of output consistent with that inflation rate. This is because in the short run, the level of output is relatively fixed and determined by factors such as labor and capital input, while prices are more flexible and respond to changes in demand and supply. Therefore, the best choice is B.

Question 8

In a self-correcting model of the economy,falling inflation and falling real interest rates eventually eliminate

Accepted Answer

In a self-correcting model of the economy, falling inflation and falling real interest rates will ultimately eliminate recessionary gaps, which occur when real GDP is below potential GDP. Expansionary gaps occur when real GDP is above potential GDP, so the correct answer is not A. Autonomous spending and induced spending are not directly affected by falling inflation and falling real interest rates, so the correct answer is not C or D. While falling inflation and falling real interest rates can help to reduce unemployment, this is not the main focus of a self-correcting model, so the correct answer is not E.

Question 9

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point ________.The long-run equilibrium combination of inflation and output for this economy is indicated by point ________.

Accepted Answer

The answer of 
-The economy pictured in the diagram above...

Question 10

To achieve long-run equilibrium in an economy with a recessionary gap,output will __________ and the inflation rate will _________.

Accepted Answer

In a recessionary gap, output is below potential output and the inflation rate is below the target rate. To achieve long-run equilibrium, output must increase and the inflation rate must also increase to reach the target rate.

Question 11

When actual inflation equals the value determined by past expectations and pricing decisions,and output equals the level of short-run equilibrium output consistent with that inflation,the economy is said to be in ________ equilibrium.

Accepted Answer

The answer of When actual inflation equals the value determined...

Question 12

When actual output equals potential output and the inflation rate is stable,the economy is said to be in ________ equilibrium.

Accepted Answer

When actual output equals potential output, the economy is said to be in long-run equilibrium. At this point, there is no pressure on prices or wages to either rise or fall, which results in a stable inflation rate.

Question 13

-The economy pictured in the diagram above has a(n)________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.

Accepted Answer

The answer of 
-The economy pictured in the diagram above...

Question 14

Policy-makers' use of stabilization policy is more appropriate when the self-correcting mechanism that eventually eliminates an output gap works ________ and when the output gap is very ________.

Accepted Answer

Stabilization policies are more appropriate when the self-correcting mechanism works slowly, meaning that the economy takes a long time to naturally return to its potential output level, and when the output gap is large, meaning that the deviation from potential output is significant. This is because the goal of stabilization policies is to close the output gap, and if the gap is already small or the self-correcting mechanism is already working rapidly, then there is a risk of overshooting and causing inflation or other unintended consequences.

Question 15

If the aggregate demand (ADI)curve in an economy is Y = 10,000 - 10,000 
,current inflation (  )equals 0.07 (7%),and potential output (Y*)equals 9,500,then in the short run,equilibrium output equals ________ and,in the long run,the inflation rate equals ________%

Accepted Answer

The answer of If the aggregate demand (ADI)curve in an...

Question 16

If the aggregate demand (ADI)curve in an economy is Y = 10,000 - 10,000 
,current inflation (  )equals 0.05 (5%),and potential output (Y*)equals 9,700,then in the short run,equilibrium output equals ________ and,in the long run,the inflation rate equals ________%

Accepted Answer

In the short run, equilibrium output is found where the ADI curve intersects the short-run aggregate supply (AS) curve. However, we are not given any information about the AS curve, so we cannot solve for short-run equilibrium output. Therefore, we must use the information provided to determine the long-run equilibrium output and inflation rate.

In the long run, output returns to potential output and the economy experiences a zero output gap. This means that at the long-run equilibrium, Y = Y*. So, we can set Y equal to 9,700 and solve for the equilibrium price level (P).

Y = ADI = 10,000 - 10,000P
9,700 = 10,000 - 10,000P
0.03 = P

So, in the long run, the inflation rate equals 3% (not 5%, the current inflation rate).

Therefore, the best choice is C: 9,500;3.

Question 17

To achieve long-run equilibrium in an economy with an expansionary gap,output will __________ and the inflation rate will _________.

Accepted Answer

In the long run, to close an expansionary gap, output will decrease as the economy returns to its potential output, and the inflation rate will increase due to upward pressure on prices from the initial excess demand.

Question 18

In a self-correcting model of the economy,rising inflation and rising real interest rates eventually eliminate

Accepted Answer

In a self-correcting model, rising inflation and real interest rates reduce aggregate demand, closing expansionary gaps by bringing output back to potential GDP.

Question 19

Recessionary output gaps are eliminated through

Accepted Answer

Recessionary output gaps are eliminated through falling inflation and lower real interest rate settings by the Bank of Canada. Lowering the real interest rate encourages borrowing and investment, which increases demand and stimulates economic growth. Additionally, falling inflation reduces the cost of borrowing and increases consumers' purchasing power, which also helps drive economic expansion.

Question 20

_________ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point ________ to long-run equilibrium at point ________,

Accepted Answer

Rising inflation will cause prices to increase, which will shift the short-run aggregate supply (SAS) curve to the left. This movement will result in a new short-run equilibrium at point A with both higher prices and lower output. In the long run, however, wages and other input prices will adjust to the higher prices, causing the SAS curve to shift back to its original position, ending up at point C. Therefore, A to C is the transition that will occur as the economy adjusts to higher inflation.

Quiz 12: The Production Function Approach to Understanding Growth

In a self-correcting model of the economy,recessionary gaps are eventually eliminated by

_ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point to long-run equilibrium at point ,

In a self-correcting model of the economy,expansionary gaps are eventually eliminated by

-The economy pictured in the diagram above has a(n) gap with a short-run equilibrium combination of inflation and output indicated by point .

At long-run equilibrium,inflation _ and actual output is equal to .

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point .The long-run equilibrium combination of inflation and output for this economy is indicated by point .

At short-run equilibrium,inflation _ and actual output is equal to .

In a self-correcting model of the economy,falling inflation and falling real interest rates eventually eliminate

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point .The long-run equilibrium combination of inflation and output for this economy is indicated by point .

To achieve long-run equilibrium in an economy with a recessionary gap,output will __ and the inflation rate will _.

When actual inflation equals the value determined by past expectations and pricing decisions,and output equals the level of short-run equilibrium output consistent with that inflation,the economy is said to be in ________ equilibrium.

When actual output equals potential output and the inflation rate is stable,the economy is said to be in ________ equilibrium.

-The economy pictured in the diagram above has a(n) gap with a short-run equilibrium combination of inflation and output indicated by point .

Policy-makers' use of stabilization policy is more appropriate when the self-correcting mechanism that eventually eliminates an output gap works and when the output gap is very .

If the aggregate demand (ADI) curve in an economy is Y = 10,000 - 10,000 ,current inflation ( ) equals 0.07 (7%) ,and potential output (Y*) equals 9,500,then in the short run,equilibrium output equals and,in the long run,the inflation rate equals %

If the aggregate demand (ADI) curve in an economy is Y = 10,000 - 10,000 ,current inflation ( 11ec9ae2_bd79_1ce7_a39a_a9c7bc0c6307_TB34225555_11 ) equals 0.05 (5%) ,and potential output (Y*) equals 9,700,then in the short run,equilibrium output equals and,in the long run,the inflation rate equals %

To achieve long-run equilibrium in an economy with an expansionary gap,output will __ and the inflation rate will _.

In a self-correcting model of the economy,rising inflation and rising real interest rates eventually eliminate

Recessionary output gaps are eliminated through

_ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point to long-run equilibrium at point ,

Quiz 12: The Production Function Approach to Understanding Growth

In a self-correcting model of the economy,recessionary gaps are eventually eliminated by

_________ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point ________ to long-run equilibrium at point ________,

In a self-correcting model of the economy,expansionary gaps are eventually eliminated by

-The economy pictured in the diagram above has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.

At long-run equilibrium,inflation ___________ and actual output is equal to __________.

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point ________.The long-run equilibrium combination of inflation and output for this economy is indicated by point ________.

At short-run equilibrium,inflation ___________ and actual output is equal to __________.

In a self-correcting model of the economy,falling inflation and falling real interest rates eventually eliminate

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point ________.The long-run equilibrium combination of inflation and output for this economy is indicated by point ________.

To achieve long-run equilibrium in an economy with a recessionary gap,output will __________ and the inflation rate will _________.

When actual inflation equals the value determined by past expectations and pricing decisions,and output equals the level of short-run equilibrium output consistent with that inflation,the economy is said to be in ________ equilibrium.

When actual output equals potential output and the inflation rate is stable,the economy is said to be in ________ equilibrium.

-The economy pictured in the diagram above has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.

Policy-makers' use of stabilization policy is more appropriate when the self-correcting mechanism that eventually eliminates an output gap works ________ and when the output gap is very ________.

If the aggregate demand (ADI) curve in an economy is Y = 10,000 - 10,000 ,current inflation ( ) equals 0.07 (7%) ,and potential output (Y*) equals 9,500,then in the short run,equilibrium output equals ________ and,in the long run,the inflation rate equals ________%

To achieve long-run equilibrium in an economy with an expansionary gap,output will __________ and the inflation rate will _________.

In a self-correcting model of the economy,rising inflation and rising real interest rates eventually eliminate

Recessionary output gaps are eliminated through

_________ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point ________ to long-run equilibrium at point ________,

_ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point to long-run equilibrium at point ,

-The economy pictured in the diagram above has a(n) gap with a short-run equilibrium combination of inflation and output indicated by point .

At long-run equilibrium,inflation _ and actual output is equal to .

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point .The long-run equilibrium combination of inflation and output for this economy is indicated by point .

At short-run equilibrium,inflation _ and actual output is equal to .

-The economy pictured in the diagram above is in short-run equilibrium with the combination of inflation and output indicated by point .The long-run equilibrium combination of inflation and output for this economy is indicated by point .

To achieve long-run equilibrium in an economy with a recessionary gap,output will __ and the inflation rate will _.

-The economy pictured in the diagram above has a(n) gap with a short-run equilibrium combination of inflation and output indicated by point .

Policy-makers' use of stabilization policy is more appropriate when the self-correcting mechanism that eventually eliminates an output gap works and when the output gap is very .

If the aggregate demand (ADI) curve in an economy is Y = 10,000 - 10,000 ,current inflation ( ) equals 0.07 (7%) ,and potential output (Y*) equals 9,500,then in the short run,equilibrium output equals and,in the long run,the inflation rate equals %

To achieve long-run equilibrium in an economy with an expansionary gap,output will __ and the inflation rate will _.

_ inflation will eventually move the economy pictured in the diagram above from short-run equilibrium at point to long-run equilibrium at point ,