Beginning with long-run equilibrium, use the aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a negative supply shock
What will be an ideal response?
The economy is at point A with the price level equal to P1 and the amount of real GDP at Y1. Y1 is also the level of potential output. A negative supply shock, such as an unexpected increase in the price of oil, will shift the SRAS curve to the left, so that the economy ends up at point B. This will increase the price level from P1 to P2. Unemployment rises as real GDP falls to Y2 which is below potential GDP.
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According to the quantity theory of money, a 10 percent increase in the quantity of money ultimately leads to a 10 percent increase in
A) real national income. B) real GDP. C) the price level. D) velocity.
A supply curve slopes downward because of the law of supply
a. True b. False Indicate whether the statement is true or false
Output for a simple production process is given by Q = 2KL, where K denotes capital, and L denotes labor. The price of capital is $25 per unit and capital is fixed at 8 units in the short run. The price of labor is $5 per unit. What is the total cost of producing 80 units of output?
A. $233 B. $525 C. $200 D. $225
How is total government spending defined? What is its size in the economy?
What will be an ideal response?