ECON EXAM #3 PART TWO

Expectations/Shocks are unexpected events that send a ripple effect through the economy. (Can be positive or negative). Expectations/Shocks are…

• Primarily on the supply side

• Primarily on the demand side

True or False: The Short Run Aggregate Supply (SAS) curve may shift for reasons other than shifts of the long run aggregate supply curve (LRAS).

• False

• True

True or False: The Short Run Aggregate Supply Curve (SAS) and the Long Run Aggregate Supply Curve (LRAS) may shift for reasons other than shifts of the long run aggregate supply curve

• True

• False

The SAS curve is upward sloping because

• as prices rise producers chose to produce less

• as prices rise producers chose to produce more

• as prices drop producers chose to produce more

• as prices drop producers chose to produce less

Why does the SAS curve shift to the right or left? (three reasons)

• Price Shocks of input

• Price (not supply) for imported (NR) natural resources (ex. oil or gas) or of a important imported NR

• International currency

• A change in average wage rate paid to workers

With a change in average wage rate paid to workers causes the SAS curve to shift where?

• Forward

• Backwards

If average rate decreases, the SAS curve shifts to the ____. If they rise, then they shift to the ____

• right; left

• left; right

An EXAMPLE of the SAS curve shifting because of a change in average wage rate that is being to workers is...

• when wages rise employers hire more people

• when wages rise employers hire less people

The Government implies a higher minimum wage...

• because they are raising it to keep up with the real of everything else (Paying people more money in real terms)

• because they are raising it to keep up with the real of everything else (Paying people less money in real terms)

• because they are lowering it to keep up with the real of everything else (Paying people more money in real terms)

• because they are lowering it to keep up with the real of everything else (Paying people less money in real terms)

When the price of oil or gas increases it shifts ____. When the price of oil or gas decreases it shifts ____

• down; up

• left; right

• up; down

• right; left