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ECON102 Chapter Notes - Chapter 26: Real Wages, Aggregate Supply, Aggregate Demand

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blueraccoon878
5 Jan 2017
School
University of Waterloo
Department
Economics
Course
ECON102
Professor
Joseph Dejuan

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ECON102 Full Course Notes
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Document Summary

Depends on quantity of labour employed, the quantity of physical and human capital, and the state of technology. Labour market can be at full employment, above full employment, or below full employment. At full employment, quantity of real gdp supplied is potential gdp. Quantity of real gdp supplied: the total quantity of g/s, valued in constant base year dollars that firms plan to produce during a given period. Aggregate supply: the relationship b/t the quantity of real gdp supplied and the price level. Long-run aggregate supply: the relationship b/t the quantity of real gdp supplied and the price level when the money wage rate changes at the same percentage price level to maintain full employment. Distinguished b/t two time frames: long run aggregate supply & short-run aggregate supply. In the long run, quantity of real gdp is equal to potential gdp. Produ(cid:272)tio(cid:374) (cid:272)osts does(cid:374)"t (cid:272)ha(cid:374)ge as pri(cid:272)e level (cid:272)ha(cid:374)ges, he(cid:374)(cid:272)e real gdp re(cid:373)ai(cid:374)s constant and las curve is vertical.

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Related Questions

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.

 

The aggregate demand curve illustrates the relationship between

a. the price level and the potential demand for real GDP.

b. the price level and the potential quantity demanded of real GDP.

c. the price level and the number of goods supplied by firms.

d. the price level and the quantity of goods demanded by households, firms, government, and foreigners.

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