Explain for each event whether it changes the quantity of real GDP supplied, short-run aggregate supply, long-run aggregate supply, or a combination of them
What will be an ideal response?
• Automotive firms in the United States switch to a new technology that raises productivity.
When firms switch to a new technology, both the short-run aggregate supply and the long-run aggregate supply increase.
• Toyota and Honda build additional plants in the United States.
Building new plants in the United States increases the U.S. capital stock and thereby increases both the short-run aggregate supply and the long-run aggregate supply.
• The prices of auto parts imported from China rise.
The increase in the price of auto parts imported from China decreases the short-run aggregate supply because the cost of producing automobiles increases. There is no effect on the long-run aggregate supply.
• Autoworkers agree to a lower money wage rate.
The lower money wage rate increases short-run aggregate supply because the cost of producing automobiles falls. There is no effect on the long-run aggregate supply.
• The U.S. price level rises.
The increase in the price level increases the short-run quantity of real GDP supplied. It has no effect on the long-run quantity of real GDP supplied.
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The price of silver increases from $10 per ounce to $15 per ounce while the price of gold increases from $300 per ounce to $310. In this situation, the price of silver relative to the price of gold has
a. fallen. b. risen. c. remained the same. d. cannot be determined given the information provided.
If the demand curve is the same as the marginal benefit curve and the supply curve is the same as the marginal cost curve, then the quantity at which they cross is
i. the equilibrium quantity. ii. the allocatively efficient quantity. iii. the quantity with no deadweight loss. A) i, ii, and iii. B) only i. C) only ii. D) only i and ii. E) only i and iii.
Rewarding or penalizing personal characteristics of a worker that are unrelated to his or her productivity is a description of
A) a negative externality. B) a labor quota. C) labor market discrimination. D) a non-income fringe benefit.
Decreasing government spending ________ the price level and ________ equilibrium real GDP
A) increases; increases B) decreases; increases C) increases; decreases D) decreases; decreases