Suppose the economy is in a recessionary gap. In the absence of any policy intervention, the short-run aggregate supply curve will eventually shift:
A. down (to the right), causing the price level to fall and output to fall.
B. down (to the right), causing the price level to fall and output to rise.
C. up (to the left), causing the price level to fall and output to rise.
D. down (to the right), causing the price level to rise and output to fall.
Answer: B
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A decrease in the level of cyclical unemployment will shift the long-run Phillips curve
Indicate whether the statement is true or false
If a demand shock causes an economy to operate at a point above potential GDP, then
a. the aggregate supply curve will shift to return the economy to the original point of equilibrium b. the economy will correct itself through rising wages and prices c. this short-run equilibrium point will become the new long-run equilibrium GDP d. the economy will correct itself through falling wage rates and prices e. the shock is said to be a negative demand shock
A product's price elasticity of demand is equal to: a. the percentage change in its quantity demanded divided by the percentage change in its price. b. the percentage change in its price divided by the percentage change in its quantity demanded. c. the average change in its quantity demanded by the average change in its price
d. the average change in its price divided by the average change in its quantity demanded.
Which of the following scenarios can cause cost-push inflation?
A. an increase in net taxes B. a major union wage settlement that increases average wage levels C. a decrease in real interest rates D. an increase in government purchases