2ndexam_f2011_part3_version1_ans-1

2ndexam_f2011_part3_version1_ans-1 - Name Discussion...

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Name______________________________________________ Discussion Section Instructor____________________________ Note: If you do not include the name of your official TA, you will be deducted 1 point from your exam total Econ 102: Fall 2011 (Eudey) First Exam Version 1 Part 3 The exam is worth 25 points. Part 3 is worth 7 points. The point-allocation for short-answer questions is indicated at the start of each short-answer problem. No books or notes are allowed during the exam.
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Short Answer: Please put a short answer in the space provided. 1. (2 points) Assume that we are producing above potential (long-run) GDP. Describe how adjustments in wages and prices take the economy from the short-run equilibrium to the long-run equilibrium. No graph is necessary. Answer: For example, if the level of output exceeds the level of potential output (a boom economy), the unemployment level will be low. As firms compete for workers and for raw materials, wages and prices will increase (1 point). This will cause the short-run aggregate supply curve to shift
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