ECON102 Lecture Notes - Lecture 16: Business Cycle, Online Public Access Catalog, Full Employment
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17 Apr 2018
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Econ 102 lecture 16 aggregate supply and e ects of shivs. Sum of total produc2on of all rms in the economy. Represents the rela2onship between overall price level in the economy and total produc2on by rms. As is representa2ve as a whole, not from any one rm, so naturally its graph refers to the whole, not individual rms. There is a long run and short run as (lras, sras) This is because as describes behaviour of rms, and in the long run price has nothing to do with it. In the short run, we assume input prices are not changing, so if the rm is able to get a higher price for their output they have an incen2ve to do so. In other words, they do not have to pay workers more or pay more for more resources (input prices) Y1 and y2 and p1 and p2 stand for output and price respec2vely.
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a) | In the AD-AS model, stagflation does not persist, because the working of the self-correcting mechanism of the economy _____ the level of output and _____ the price level until the economy eventually returns to a long-run equilibrium state, where actual output _____ potential output.
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b) | The LRAS curve is drawn as a vertical line at potential output (Y*) to indicate that
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c) | Stagflation arises in the context of the AD-AS model when some external factor causes
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d) | If the SRAS curve is positively sloped, then a decrease in the demand for Canadian-made goods in Europe will lead to _____ in the price level, in the short run.
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e) | Which of the following will shift the aggregate demand curve to the right?
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f) | Suppose a stock market crash decreases the stock of household wealth and therefore causes autonomous consumption to fall. Which of the following is the likely result?
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g) | An economy is characterized by the AD equation P = 200 ? 0.02Y, SRAS equation P = 100 and LRAS equation Y* = 5000. In the absence of any change in policy or exogenous shocks, this economy will achieve a long-run price level of
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h) | The AD-AS model depicts a self-correcting economy. This means that the price level in the model adjusts automatically in response to a(n) _____ gap, so as to eliminate the _____ gap in the long run, without requiring any help from government policies.
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i) | The aggregate demand curve shows
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j) | Consider an economy initially at long-run equilibrium with output (Y) equal to potential output (Y*). If the SRAS is positively sloped, then a shift to the right of the AD curve will lead to _____ in the price level, in the short run. In the long run, the SRAS curve will shift to the _____ and the equilibrium will be at __________.
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