Describe how adjustments in wages and prices take the economy from the short-run equilibrium to the long-run equilibrium
What will be an ideal response?
For example, if the level of output exceeds the level of potential output (a boom economy), the unemployment level will be low. As firms compete for workers and for raw materials, wages and prices will increase. This will cause the short-run aggregate supply curve to shift upwards, a process that will continue as long as the economy produces at a level of output that exceeds potential output. At some point the short-run aggregate supply curve will reach the long-run equilibrium, which is where the aggregate demand curve intersects the long-run aggregate supply curve.
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What is measured on the horizontal axis of the aggregate demand/aggregate supply model?
A) real wealth B) real Gross Domestic Product (GDP) C) prices D) nominal income
Robert Lucas has popularized the notion that with respect to
A) severity, business cycles are all alike. B) causation, business cycles are all alike. C) quantitative behavior of co-movements among series, business cycles are all alike. D) qualitative behavior of co-movements among series, business cycles are all alike.
Sales taxes generate nearly 50% of the tax revenue for state and local governments
a. True b. False Indicate whether the statement is true or false
Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to
a. shift the supply curve up by exactly $4 and the price paid by buyers will remain unchanged. b. shift the supply curve up by exactly $4 and the price paid by buyers will rise by less than $4. c. shift the supply curve up by exactly $4 and the price received by sellers will rise by exactly $4. d. shift the demand curve down by exactly $4 and the price paid by buyers will fall by exactly $4.