Explain why the long run aggregate supply curve (LRAS) is vertical.
Given that the LRAS curve constrains the long run growth potential
of the economy, discuss what can be done to make it grow more
quickly. Are there any examples of current policies (or proposed
policies) trying to do just that?
1. Explain why the long-run aggregate supply (LRAS)
curve is vertical while the short-run aggregate supply (SRAS) curve
slope upwards. List and discuss briefly the variables that could
cause the LRAS and the SRAS curves to shift. For each variable,
identify whether an increase in that variable will cause the curves
(LRAS and SRAS curves) to shift to the right or to the left.
2. What are the main roles of the Reserve Bank of
Australia (RBA)? How does the...
The short-run aggregate supply curve slopes upward because of
the:
Question 53 options:
the catch-up effect
wealth effect
real exchange rate effect
the sticky wage or sticky input price effect
Fill in the blanks of the following sentence. When financial
markets are ________, leverage ________; when they are ________,
leverage ________.
Question 59 options:
booming; magnifies the losses; crashing; multiplies the
gains
crashing; mitigates the losses; booming; mitigates the gains
None of these statements is true.
booming; multiplies the gains;...
In the long run in a competitive constant-cost industry
A. A firm’s supply curve is upward sloping but the industry
supply curve is perfectly elastic at the minimum of AVC.
B. firm’s supply curve is upward sloping but the industry supply
curve is perfectly elastic at the minimum of ATC.
C. Both the industry and a firm’s supply curve are perfectly
elastic at the minimum of ATC.
D. The supply curve for a firm is perfectly elastic at the
minimum...
Suppose the demand curve for a product is vertical and the
supply curve is upward sloping. If a unit tax is imposed in the
market for this product, A. buyers bear the entire burden of the
tax. B. buyers share the burden of the tax with government. C. the
tax burden will be shared equally between buyers and sellers. D.
sellers bear the entire burden of the tax.
Explain how a downward-sloping demand curve results from
consumers adjusting their consumption...
Why the aggregate supply curve slopes upward in the
short run
In the short run, the quantity of output that firms supply can
deviate from the natural level of output if the actual price level
in the economy deviates from the expected price level. Several
theories explain how this might happen.
For example, the misperceptions theory asserts that changes in
the price level can temporarily mislead firms about what is
happening to their output prices. Consider a soybean farmer who...
According to the AD/AS model, the long-run aggregate supply
curve is determined by the availability of labor, capital, natural
resources and technology.
Select one:
True
False
A decrease in demand would cause the price level to fall and the
SRAS to shift to the left.
Select one:
True
False
Suppose the economy is in long-run equilibrium. If there is an
increase in government spending at the same time that an increase
in resources reduces production costs, then in the short-run...
Graph a labor supply curve with an upward-sloping labor supply.
Label the vertical axis as “wage rate” and the horizontal axis with
“Quantity of labor”
a. Place these two points on the curve: {wage= $10, quantity =
30} and {wage = $12, quantity = 45}. Calculate the labor supply
elasticity.Label this curve as “Curve A”
b. Now, assume that something has changed the labor supply curve
so that now the line has a different slope. On this new curve are...
AD-SRAS-LRAS model of the economy. Assume the SRAS curve is
upward sloping.
a. Congress has debated raising the minimum wage to over $10 per
hour. Doing so would permanently increase the production costs to
businesses, especially those relying on lower-skilled workers. Use
the AD-AS model to discuss the macro impacts on the price level,
real GDP and unemployment.
b.The Federal Reserve has decided to design a policy response to
the shift in part (a). What policy options are available and...