Explain how the economy moves back to full employment from recession. Be sure to detail what happens to short-run aggregate supply, unemployment, equilibrium GDP and the price level
What will be an ideal response?
When an economy enters a recession, sales fall and unemployment rises via the automatic adjustment mechanism. The unemployment resulting from the recession makes workers more willing to accept lower wages. The slack demand will make firms willing to accept lower prices for their goods. In addition, the decline in the price level that occurs when the economy went into recession also makes workers willing to accept lower wages, and firms accept lower prices. This shifts the short-run aggregate supply curve to the right and moves the economy back toward potential GDP. Unemployment falls back to the natural level, and the price level falls.
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If two countries specialize,
a. the other countries trading with them cannot specialize b. everyone in both countries gains c. the total of goods produced increases d. the other countries trading with them must specialize as well e. all goods will be produced in both states
The dollar value of a waste-end charge that would achieve efficiency in this market is
Use the following forany or all of Questions 11 through 13 below. Consider the following model of the municipal solid waste (MSW) services market in the city of Houston. MSC = 1.5 + 1.25Q MSB = 30 – 2.5Q MEC= 0.75Q MEB= 0 whereQ is the number of trash containers serviced per household per month. a. $7.60 c. $9.5 b. $11 d. none of the above
One piece of evidence in favor of the efficiency wage model is that some sectors of the economy pay relatively high wages, whereas other sectors pay lower wages. This supports the efficiency wage model as it seems to provide evidence of what?
A. High-wage firms take advantage of delayed-compensation contracts. B. Workers voluntarily provide bonds in case they are caught shirking. C. Unemployment is constant across sectors. D. Dual labor markets exist. E. There are compensating differentials being paid depending on the type of work being done.
Refer to the information provided in Figure 2.5 below to answer the question(s) that follow.
Figure 2.5Refer to Figure 2.5. For this economy to move from Point B to Point C so that an additional 20 OLED televisions could be produced, production of LCD televisions would have to be reduced by
A. more than 30. B. exactly 60. C. fewer than 30. D. exactly 30.