ECON102 Lecture Notes - Lecture 7: Fiscal Policy, Longrun, Technological Change

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carminescorpion131

9 Nov 2016

School

University of Waterloo

Department

Economics

Course

ECON102

Professor

Joseph Dejuan

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Aggregate supply is the relationship between the quantity of real gdp supplied and the price level. It is distinguished between two time frames because the relationship is different. Relationship between quantity of real gdp supplied and the price level when the money wage rate changes in step with the price level to maintain full employment. Vertical line at potential gdp because potential gdp is independent of the price level. Increase [decrease] in price level is matched by an increase [decrease] in the money wage rate. The real wage rate remains unchanged at its full-employment equilibrium level. When price level changes and real wage rate remains constant, employment remains constant and real gdp remains constant at potential gdp. Relationship between the quantity of real gdp supplied and the price level when the money wage rate, price of other resources, and potential. Rise in price level increases the quantity of real gdp supplied.

Related Questions

The long-run aggregate supply curve is vertical because:

a. the natural level of real GDP is independent of the price level

b. there is no cyclical inflation

c. at full employment, prices are stable.

d. the money wage rate increases faster than the price level

rubykoala550

1. In the long run, when prices are perfectly flexible:

a. aggregate supply is vertical and a market economy is self-correcting.

b. a market economy cannot self-correct.

c. government will be required to set prices to maintain equilibrium.

d. changes in aggregate demand cause equilibrium real GDP to change.

2. An increase in household wealth when the SRAS curve is upward sloping:

a. leads to an increase in the price level but has no impact on real GDP

b. has no impact on the price level but leads to an increase in real GDP

c. leads to an increase in both the price level and real GDP

d. has no impact on the price level or real GDP

3. In the long run, continued increases in aggregate demand not matched by similar increases in aggregate supply will cause:

a. an increase in the full-employment level of real GDP

b. a recessionary gap

c. a decrease in the price level

d. an increase in the price level

4. The vertical long-run aggregate supply curve implies that:

a. changes in aggregate demand will not affect the price level

b. the short-run aggregate supply curve is also vertical

c. natural or full-employment real GDP does not depend on the price level, in the long run

d. natural or full-employment real GDP is the same as the equilibrium real GDP in the short run

5. A rightward shift of the long-run aggregate supply curve illustrates:

a. economic growth

b. a recessionary gap

c. an inflationary gap

d. a decrease in natural real GDP

6. When the economy is in a recessionary gap

a. there is a surplus of labor

b. there is a shortage of labor

c. it is producing a real GDP level that is greater than natural real GDP

d. the unemployment rate is less than the natural unemployment rate

7. If the actual unemployment rate is less than the natural unemployment rate:

a. a recessionary gap exists and wages are likely to rise

b. an inflationary gap exists and wages are likely to rise

c. a recessionary gap exists and wages are likely to fall

d. an inflationary gap exists and wages are likely to fall

8. An economy in long-run equilibrium is producing:

a. a level of real GDP that is greater than its natural real GDP

b. where both the price level and real output are maximized

c. a level of real GDP equal to its natural real GDP

d. in the vertical range of aggregate demand.

crimsonreindeer720

Long-run macroeconomic equilibrium ______.

A. comes about because the real wage rate adjusts.

B. occurs, when the quantity of real GDP demanded, equals the quantity of real GDP supplied, at the point of intersection of the AD curve and the SAS curve.

C. occurs when real GDP equals potential GDP, and the LAS, SAS, and AD curves intersect.

D. occurs when real GDP equals potential GDP and the money wage rate equals the real wage rate.

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ECON102 Lecture Notes - Lecture 7: Fiscal Policy, Longrun, Technological Change

ECON102 Full Course Notes

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