Using the aggregate demand and aggregate supply (AD-SRAS) framework, explain how a large-scale natural disaster would be expected to impact the economy. Discuss how an economist who believes the economy is self-regulating would view the longer term impact of such a disaster, and whether they would advocate the need for government intervention
A large-scale natural disaster represents an adverse supply shock, and thus the SRAS curve would shift leftward as a result. A leftward shift in the SRAS curve causes a rise in the price level and a decline in Real GDP, possibly pushing the economy into a recessionary gap. Economists who believe the economy is self-regulating would contend that even if the economy were in a recessionary gap that it would be a temporary situation. If Real GDP fell below its natural level, over time wages would fall, the SRAS curve would shift rightward, and the recessionary gap would be eliminated without the need for government intervention to resolve the problem.
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Which of the following is true in regards to Okun's law?
A) employment does not increase commensurately with output rises because firms tend to hoard labor B) when demand increases, firms tend to work their employees harder and longer C) it is Okun's prediction of the negative relationship between the output and unemployment gaps that allows the modern Phillips curve to be translated into the AS curve D) all of the above E) none of the above
The difference between disposable income and consumption spending is
a. transfer payments. b. personal taxes. c. net exports. d. personal investment. e. personal saving.
Given the graph shown, the quantity that would be associated with the price of $4 in a supply table would be:
A. 2. B. 8. C. 6. D. 4.
When is the largest portion of tax paid by the consumer?
a. when demand is less elastic than supply b. when demand is more elastic than supply c. when demand and supply have an equal elasticity d. when demand and supply have fluctuating elasticity