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A.

If membership falls in labor unions and unions become less popular, then:
production costs will increase, SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level.
production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level.
production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level.
production costs will fall, there will be a downward movement along SRAS, equilibrium GDP will increase and aggregate price level will fall.

B.

If the short-run macroeconomic equilibrium is _________ of the economy's potential output, then there is a(n) ________ and the aggregate price level is expected to ________.
to the left; inflationary gap; fall
to the left; recessionary gap; fall
to the right; recessionary gap; rise
to the right; inflationary gap; fall

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Raushan Raj
Raushan RajLv8
28 Sep 2019

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Related questions

1) If actual (equilibrium ) real GDP is less than the full-employment, or natural, level of real GDP, then wages and other input prices are expected to:

a. fall and SRAS to shift to the left until long-run equilibrium is achieved.

b. fall and SRAS to shift to the right until long-run equilibrium is achieved.

c. rise and SRAS to shift to the left until long-run equilibrium is achieved.

d. rise and SRAS to shift to the right until long-run equilibrium is achieved.

2) In a self-regulating economy, inflationary gaps are automatically eliminated in the long run by:

a. decreases in wage rates that cause short-run aggregate supply to shift rightward.

b. decreases in wage rates that cause short-run aggregate supply to shift leftward.

c. increases in wage rates that cause short-run aggregate supply to shift rightward.

d. increases in wage rates that cause short-run aggregate supply to shift leftward.

3) Assume the economy is initially in equilibrium at the full-employment level of real GDP. If businesses and consumers become pessimistic regarding future economic conditions, ceteris paribus, the aggregate demand curve will shift to the ________, causing the level of output to ______.

a. left; fall

b. right; fall

c. left; rise

d. right; rise

4) Economists that advocate a macroeconomic policy of laissez-faire:

a. believe the economy is self-regulating only if the government intervenes to move the economy to equilibrium at natural real GDP.

b. believe the economy is self-regulating and will automatically move to equilibrium at natural real GDP in the long run.

c. also advocate central planning and government control of resources.

d. also advocate active government intervention in the economy.

5) Which of the following summarizes the process for closing a recessionary gap if the economy is self-regulating?

a. Labor shortages put upward pressure on wages, which leads to higher costs of production and a decrease in short-run aggregate supply.

b. Labor shortages put downward pressure on wages, which leads to increases in employment and spending and an increase in aggregate demand.

c. Unemployed resources put upward pressure on the price level, which leads to higher wages, increases in spending, and increases in aggregate demand.

d. Unemployed resources put downward pressure on the price level, which leads to lower costs of production and an increase in short-run aggregate supply.

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.

 

6) According to Classical theory, the economy is self-regulating. If it is in a recessionary gap, what happens? Question options:

Wages rise, the SRAS curve shifts leftward, and both Real GDP and the price level rise.

Wages fall, the SRAS curve shifts rightward, the price level falls, and Real GDP rises.

Wages fall, the SRAS curve shifts leftward, the price level rises, and Real GDP falls.

none of the above

7) According to the classical economists, which of the following statements is true?

Question options:

Financial markets ensure that S will equal I..

Interest rate flexibility will ensure that planned saving is equal to planned investment.

There is a direct relationship between the amount individuals plan to save and the interest rate - higher rates cause people to save more and lower rates reduce savings.

Interest rates determine how much business firms invest - higher interest rates reduce investment and lower rates increase investment.

All of the above are true.

10)

If actual Real GDP is greater than the full employment Real GDP, then the (actual) unemployment rate is

Question options:

greater than the natural unemployment rate and an inflationary gap exists.

less than the natural unemployment rate and a recessionary gap exists.

greater than the natural unemployment rate and a recessionary gap exists.

less than the natural unemployment rate and an inflationary gap exists.

equal to the natural unemployment rate and no gap exists.

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