LRAS & Macroeconomic Outcomes

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In the short-run resource prices are ​

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and wages are ​

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. In the long-run, resource prices are ​

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.

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Multiple Choice

What is the vertical line called on the Aggregate Model?

• short-run aggregate supply
• aggregate demand
• long-run aggregate supply

• Real GDP

Multiple Choice

This graph is showing...

• Inflationary Gap

• Recessionary Gap

• Equilibrium/Full Employment

Multiple Choice

Recessionary Gap

• Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.

• Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)

• Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.

• A gap with higher prices and a decrease in GDP

• Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)

Multiple Choice

Inflationary Gap

• Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.

• Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)

• Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.

• A gap with higher prices and a decrease in GDP

• Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)

Multiple Choice

Assume the economy is in long run equilibrium and the government increases spending on healthcare

• AD will shift right and an inflationary gap will result

• AD will shift left and a recessionary gap will result

• AS will shift right and an inflationary gap will result

• AS will shift left and a recessionary gap will result

• No change will result

Multiple Choice

Assume the economy is in long run equilibrium and trading partners increase the price of oil, a key resource

• AD will shift right and an inflationary gap will result

• AD will shift left and a recessionary gap will result

• AS will shift right and an inflationary gap will result

• AS will shift left and a recessionary gap will result

• No change will result

Multiple Select

The long run aggregate supply curve is also known as

• Structural Unemployment

• Full-employment

• Natural Rate of Unemployment

• Cyclical unemployment

Multiple Select

What causes the LRAS to shift (select all)

• Increasing technology

• Changes in quality and quantity of the factors of production

• It happens by itself if we just wait

• Demanding higher wages

Multiple Choice

According to classical economists, which of the following will occur to move this economy to long-run equilibrium

• Autonomous consumption will cause aggregate demand to increase

• Consumer spending will increase shifting aggregate demand to the right

• Deficit government spending should be used to shift aggregate demand to the right

• Wages will decrease causing aggregate supply to increase