RHW9ANS

# RHW9ANS - Rhw9 1 3 7 9 10 11 16 20 21 24 25 30 31 35 38 40...

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Rhw9 1 3 7- 9 10 11 16 20 21 24 25 30 31 35 38 40- 41 44 Final Score Number of Points Number of Students 0 - 5 2 >5 - 10 3 >10 - 15 11 >15 - 20 26 >20 - 25 34 >25 - 30 66 >30 - 35 54 >35 - 40 39 >40 - 43 16 Submissions 251 Total Score Possible 43 Mean 28.62 Median 29 Mode 27 Range 0 - 43 Quartile 1 24 Quartile 3 35 Standard Deviation 8.10 Question1 - Single Correct 1.0 Point In the long run, a decrease in aggregate demand, all other things unchanged, will cause the price level to _______ and potential output to _______ . A increase; increase B decrease; decrease C increase; remain stable D decrease; remain stable VERTICAL LINE IN FIGURE BELOW IS LR AGG S. DECREASE IN AGG D FROM AGGD2 TO AGGD2 WILL DECREASE PRICE (FROM PD TO PA) WHILE OUTPUT STAYS AT YP

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FIGURE 2 Suppose the economy is initially at K . Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium? A Over time, the aggregate demand curve will shift to the right until long-run equilibrium is restored at J and the gap is closed. B Rising unemployment puts pressure on nominal wages to fall. The SRAS curve shifts right to SRAS 1 closing the gap at H . C In response to rising prices, firms will increase production moving along SRAS 2 until long- run equilibrium is restored at J and the gap is closed. D Rising unemployment puts pressure on nominal wages to fall. Firms employ more workers moving along SRAS 2 until long-run equilibrium is restored at J and the gap is closed. K IS SR EQUILIB (AGGD=SR AGGS). WITH OUTPUT BELOW FULL EMP, WORKERS WILL EVENTUALLY ACCEPT LOWER WAGES (PRICES ‘UNSTICK’) AND AS COSTS OF PRODUCTION FALL, SR AGG S CURVE SHIFTS DOWN TO SRAS1 UNTIL NEW LR (AND SR) EQUILIBRIUM AT A. WHY A? IF TO LEFT, UNEMP STILL HIGH AND WAGES FALL MORE. IF TO RIGHT OF A, LITTLE/NO UNEMP AND WAGES DRIVEN UP. Price level SRAS 2 DS R A S 1 C B A AD 2 1 Real GDP per year Y p Y b P d P C P b P a
FIGURE 1 Question7 - Single Correct 1.0 Point SEE FIGURE 2 ABOVE - IN SR AGG D1 SHIFTS TO RIGHT TO AGGD2 AND NEW EQUILIB AT B WITH Y AND P UP. HOWEVER IN LR, NEW EQUILIBRIUM IN D WITH ONLY PRICES HIGHER, OUTPUT BACK TO NATURAL RATE LEVEL OF OUTPUT (SRAS1 WILL SHIFT UP TO SRAS2 IN LR ) Suppose that the economy is in long-run equilibrium at point A . Now suppose government purchases of goods and services increases. What happens in the SR / LR?

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RHW9ANS - Rhw9 1 3 7 9 10 11 16 20 21 24 25 30 31 35 38 40...

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