1. The short-run aggregate supply curve shows:
a. What happens to output in an economy as the price level changes, holding all other determinants of real GDP constant.
b. What happens to output in an economy when the government spends more money.
c. How firms respond to changes in interest rates.
d. The relationship between the price level and aggregate expenditure.
2. Which of the following are assumed to remain unchanged along a given short-run aggregate supply curve? Check all that apply.
- The position of the aggregate demand curve
- Resource prices
- Real GDP
- Institutions, such as patent laws and tax systems, that make up the "rules of the game"
3. The term short-run macroeconomic equilibrium refers to:
a. The situation when aggregate price level is in equilibrium.
b. The situation when the aggregate supply curve and the aggregate demand curve as used together to analyze economic fluctuations.
c. The situation when the quantity of aggregate output produced in the short-run is in equilibrium.
d. The situation when the quantity of aggregate output supplied is equal to the quantity demanded.
4. In macroeconomics, the term long run refers to:
a. A period of 1 year.
b. A period of 10 years.
c. A period of time in which some input prices and wages are fixed.
d. A period of time long enough for all input prices and wages to be renegotiated.
Aggregate Supply and Aggregate Demand:
Aggregate supply shows the level of output supplied by the economy, GDP, at different price levels. Aggregate demand shows the level of output, GDP, demanded at different price levels. Equilibrium is where aggregate demand equals aggregate supply. This gives the level of GDP in the economy at the current price level.
Answer and Explanation:
1) Answer: D.
This is the definition of aggregate supply. How output or aggregate expenditure changes as the price level changes.
2) Answer: Resource prices and Institutions.
The demand curve can shift up and down the aggregate supply curve and the supply curve shows the amount of Real GDP supplied at different prices. However, if resource prices change the aggregate supply curve will shift left or right and if institutions change the aggregate supply curve will shift left or right.
3) Answer: D
The definition of equilibrium is where the aggregate demand curve crosses the aggregate supply curve. This is the point where aggregate output supplied equals aggregate output demanded.
4) Answer: D.
The long run doesn't refer to a specific period of time. It refers to a time long enough for all factors of production to be variable.
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from Economics 102: MacroeconomicsChapter 7 / Lesson 3