BU204_03_Johnson_Jennifer_Unit_6_Homework prof corrections

BU204_03_Johnson_Jennifer_Unit_6_Homework prof corrections...

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Jennifer Johnson Kaplan University BU204- 03 Macroeconomics Anthony Brogna Unit 6 November 22, 2010
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“Sticky” nominal wages “are slow to fall even in the face of high unemployment and slow to rise even in the face To me this means sticky wages mean that salaries do not fall in a recession, they just grow slower. For example, over the last year there were many news stories of companies reducing their workforce and laying off people by the thousands. However, there were hardly any news stories of dramatic across the board pay cuts. They simply keep the wages at the same rate. - Good. In general prices are considered flexible upwards and somewhat inflexible downwards. Long Run Aggregate Supply Curve “shows the relationship between the aggregate price level and the quantity of aggregate output supplied that would exist if all prices, including nominal wages, were fully flexible” After reading the information on the aggregate supply curve, I think that it depicts the quantity of real GDP that is supplied by the economy at different price levels. The reasoning used to construct the aggregate supply curve differs from the reasoning used to construct the supply curves for individual goods and services. The supply curve for an individual good is drawn under the assumption that input prices remain constant. As the price of good A rises, sellers' per unit
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costs of providing good A do not change, and so sellers are willing to supply more of good A- hence, the upward slope of the supply curve for good A. The long run aggregate supply curve shows that while there may be immediate changes in prices, over time they will reach equilibrium again. All prices in the end will equal out to where they will be able to have the same amount of output at any price. Marginal Propensity to Consume
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BU204_03_Johnson_Jennifer_Unit_6_Homework prof corrections...

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