EC140 Study Guide - Final Guide: Potential Output, Human Capital, Business Cycle

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EC140 Full Course Notes

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An increase in us income will increase price level in the sr. A decrease in ad, or increase in as will causes prices to fall in sr. A decrease in ad will causes prices to fall in lr. If the cad depreciates wrt the usd, price level and output will increase in the sr. If the cad depreciates, in the lr, price level will increase but output will not change. Increase in desired savings reduces price level and gdp in sr. An increase in desired savings had no effect on potential gdp, in the lr it will decrease price level and no effect on real gpd. In neoclassical growth model, if physical capital, human capital and population increase at the same rate, real gdp increases and real gdp per capita stays constant in the lr. In canada, this increases ad also costs for firms. Short-term, price level will increase but the change in gdp is uncertain.

Related Questions

A. A decrease in aggregate supply can result in:

a recession
cost-push inflation
demand-pull inflation
unemployment

B. In the short run (intermediate-range) of the aggregate supply curve, higher aggregate demand will increase

the price level but reduce real GDP.
real GDP without raising the price level
the price level without affecting real GDP
both the price level and real GDP

C. Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services
As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
As prices fall, the government will have to reduce taxes, which will lead to an increase in the number of goods and services purchased
As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the number of goods and services purchased

carminewasp285

1. Explain how the real balance effect works?

2. How will either the AD curve or SRAS curve shift as a result of each of the following changes:

A rise in the interest rate

An adverse supply shock

A rise in wealth

3. Explain what happens to U.S. net exports and U.S. aggregate demand as the dollar depreciates

4. Explain what happens to aggregate demand in each of the following cases: (a) The interest rate rises; (b) Wealth falls; (c) The dollar depreciates relative to foreign currencies; (d) Households expect lower prices in the future; (e) Business taxes rise.

5. Explain how expectations about future sales will affect investment.

6. Explain how each of the following can affect short-run aggregate supply: (a) An increase in wage rates; (b) A beneficial supply shock; (c) An increase in the productivity of labor; (d) A decrease in the price of a nonlabor resource (such as oil).

(a) An increase in SRAS that is greater than the increase in AD will lead to an increase in Real GDP and a fall in the price level.

(b) A decrease in AD that is greater than the increase in SRAS will lead to a fall in both the Real GDP and the price level.

roseshark361

1. if the economy is at equilibrium on AD_2, policies that increase AD will

a. increase prices, but not real GDP

b. increase prices and increase real GDP

c. Decrease prices and real GDP

d. have no effect on the price level

2. if the economy is at equilibrium on AD₄, the best policy for maintaining full employment would be

a. contractionary policies to decrease AD

b. expansionary policies to increase AD

c. increase governmnet spending

d. do nothing to change AD

3. one of the macroeconomic goals is full employment, which economist equate to an unemployment rate of

a. 0% b. 1% c. 5% d. 100%

4. when foreign nations lower the value of their ecurrency relative to the US exports become ________ expensive and will cause US GDP to _______, ceteris paribus.

a. More, rise

b. Less, rise

c. More, fall

d. Less, fall

EC140 Study Guide - Final Guide: Potential Output, Human Capital, Business Cycle

EC140 Full Course Notes

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