Answer Blanks: 1. $12 trillion, $16 trillion, $20 trillion, $8 trillion, $10 tri
ID: 1212123 • Letter: A
Question
Answer Blanks:
1. $12 trillion, $16 trillion, $20 trillion, $8 trillion, $10 trillion
2. A recessionary gap, an expansionary gap
3. $4 trillion, $5 trillion, $1 trillion, $2 trillion, $3 trillion
4. 145, 135, 140
5. The same as, lower than, higher than
6. Increase, decrease
7. Increase, decrease
8: AD, LRAS, SRAS
9. Left, right
10. Decrease, increase
11. Increase, decrease
12. Increase, decrease
13. AD, LRAS, SRAS
14. Right, left
15. Inflation, unemployment
16. Unemployment, inflation
Could you show what the graph would look like as well please? Thank you :)
Explanation / Answer
1. 16 trillion, the potential output of the economy is determined by the intersection of the LRAS and AD curve. here the LRAS is fixed at 16 trillion which is the long-run supply.
2. an expansionary gap, this is because the long-run output of the economy is 16 trillion vis-a-vis the current level of 20 trillion.
3. 4 trillion $ - the difference between 20$ trillion and 16$ trillion.
4. 135, this is the price where output of the SRAS1 is equal to 16 trillion.
5. lower than; prices are much higher than anticipated, so the worker has less purchasing power.
6. reduce; at this low real wage, demand for labor will rise and hiring will increase.
7. Increase, the workers will realize that prices are higher and will demand higher wages.