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CHAPTER 11 - the short run f The situation described in...

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CHAPTER 11 1.2 In the exhibit below, how does the real wage rate at point c compare with the real wage rate at point a? How do nominal wage rates compare at those two points? Explain your answers. 2.1 a. If the actual price level exceeds the expected price level reflected in long- term contract, real GDP equals ___14.2 trillions___ and the actual price level equals ___130____ in the short run. b. The situation described in part (a) results in a(n) _expansionary _ gap equal to__0.2 trillions_____. c. If the actual price level is lower than the expected price level reflected in long-term contracts, real GDP equals __13.7 trillions_____ and the actual price level equals __110____ in the short run. d. The situation described in part (c) results in a (n) _recessionary______ gap equal to _0.3 trillions______. e. If the actual price level equals the expected price level reflected in long-term contracts, real GDP equals __14.0 trillions_____ and the actual price level equals __120_____ in
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Unformatted text preview: the short run. f. The situation described in part (e) results in a (n) __no_____ gap equal to __0_____. 3.1 1. Increases in technology 2. Increases in productivity 3. Better educated workers An increase in AD does not affect potential output, exhibit four in the book on page 161 is an illustration of potential output and aggregate demand. 3.2 An adverse supply shock would be a war in the Middle East doubling the price of oil. The higher prices would cause supply curves to move to the left, raising the price and decreasing the quantity traded. Exhibit 7 on page 166 in the book is an illustration of adverse supply shock. A beneficial one would be the doubling of the Florida orange crop due to favorable weather. The supply curve for things like oranges and orange juice would move to the right, lowering prices and increasing quantity traded. Exhibit 6 page 165 in the book is an example of supply shock....
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