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Macroeconomics Study Set 44

Business

Quiz 24 :

From the Short Run to the Long Run: the Adjustment of Factor Prices

Quiz 24 :

From the Short Run to the Long Run: the Adjustment of Factor Prices

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Which of the following would occur as part of the automatic adjustment process in an economy with a recessionary gap?
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Answer:

E

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Consider an AD/AS model in long- run equilibrium. An output gap, caused by a leftward shift of the AD curve, would be eliminated if
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A

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The Phillips curve describes the relationship between
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C

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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 .
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Consider the basic AD/AS macro model in long- run equilibrium. An expansionary AD shock will the price level and output in the short run. In the long run, the price level will And output .
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What economists sometimes call the "long- run aggregate supply curve" is
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In the long run in the AD/AS macro model we can say that
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If the economy is experiencing an inflationary output gap, the adjustment process operates as follows:
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Consider the basic AD/AS macro model in long- run equilibrium. An expansionary AD shock would have _ output effect in the short run and _ output effect in the long run.
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Consider the AD/AS model, and suppose that the economy begins at potential output. The effect of a positive AS shock on real GDP will be reversed in the long run with a shift in .
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An inflationary output gap is characterized by
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Automatic fiscal stabilizers the impact of demand or supply shocks on the economy since government's net tax revenues during booms and during recessions.
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Consider the AD/AS model. Since output in the long run is determined by Y*, the only role of the AD curve is to determine the price level. This is true because the
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If the economy in the short run is experiencing a recessionary gap, we are likely to see
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As the macro economy adjusts from the short run to the long run,
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If the short- run macroeconomic equilibrium occurs with real GDP less than Y*, the economy is
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Suppose the economy is in macroeconomic equilibrium with real GDP equal to Y*. If the government then implements an expansionary fiscal policy by increasing government purchases, what are the long- run effects on potential output?
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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 .
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If wages rise faster than increases in labour productivity, then unit labour costs will
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The study of short- run cyclical fluctuations usually assumes, for simplicity, that there are no changes in
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