Assuming that the LAS Curve remains stationary and does not shift, if an economy
ID: 1215783 • Letter: A
Question
Assuming that the LAS Curve remains stationary and does not shift, if an economy is at its potential output, an expansionary macro policy will cause real output to:
Assuming that there is no government policy intervention, if potential output is less than aggregate demand at a given price level, eventually the short run aggregate supply curve will shift:
If workers begin to expect more inflation in the future, then we would expect that:
If a fall in the price level increases the quantity of aggregate demand, it might be because:
According to the AS/AD Model, the aggregate economy is depicted as being in a long run equilibrium:
A. fall in the short run and in the long run. B. rise in the long run but not in the short run. C. rise in the short run but not the long run. D. rise in both the short run and the long run.Explanation / Answer
Assuming that the LAS Curve remains stationary and does not shift, if an economy is at its potential output, an expansionary macro policy will cause real output to- c)rise in the short run but not the long run.
Explanation- In that case SRAS will shift and causes nominal wages to fall down.
Assuming that there is no government policy intervention, if potential output is less than aggregate demand at a given price level, eventually the short run aggregate supply curve will shift:- D. down and eliminate the inflationary gap.
Explanation- Employment in an economy with an inflationary gap exceeds its natural level—the quantity of labor demanded exceeds the long-run supply of labor. A nonintervention policy would rely on nominal wages to rise in response to the shortage of labor. As nominal wages rise, the short-run aggregate supply curve begins to shift.
If workers begin to expect more inflation in the future, then we would expect that:- a. the short run aggregate supply curve will shift up.
Explanation- This is because when workers expect more inflation in future they will expect wages to grow fast today.This causes to raaise production cost and farm will raise prices at each production level.
If a fall in the price level increases the quantity of aggregate demand, it might be because- C. people feel richer and spend more.
Explanation- In that case people know that if he doesnot pay higher price then somebody else will come and buy that product.
According to the AS/AD Model, the aggregate economy is depicted as being in a long run equilibrium:- A. at the intersection of the LAS Curve and the AD Curve.