Chapter 30
Problems and Applications
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Figure 6
1. a. The current state of the economy is shown in Figure 6. The aggregate-demand curve and short-run aggregate-supply curve interct at the same point on the long-run aggregate-supply curve.
b. A stock market crash leads to a leftward shift of aggregate demand. The equilibrium level of output and the price level will fall. Becau the quantity of output is less than the natural rate of output, the unemployment rate will ri above the natural rate of unemployment.
c. If nominal wages are unchanged as the price level falls, firms will be forced to cut back on employment and production. Over time as expectations adjust, the short-run aggregate-supply curve will shift to the right, moving the economy back to the natural rate of output.
2. a. When the United States experiences a wave of immigration, the labor force increas, so long-run aggregate supply shifts to the right.
b. When Congress rais the minimum wage to $10 per hour, the natural rate of unemployment ris, so the long-run aggregate-supply curve shifts to the left.
c. When Intel invents a new and more powerful computer chip, productivity increas, s
o long-run aggregate supply increas becau more output can be produced with the same inputs.
d. When a vere hurricane damages factories along the East Coast, the capital stock is smaller, so long-run aggregate supply declines.
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3. a. The current state of the economy is shown in iris是什么意思Figure 7. The aggregate-demand curve and short-run aggregate-supply curve interct at the same point on the long-run aggregate-supply curve.
Figure 7
永远的英文 b. If the central bank increas the money supply, aggregate demand shifts to the right (to point B). In the short run, there is an increa in output and the price level.
c. Over time, nominal wages, prices, and perceptions will adjust to this new price level. As a result, the short-run aggregate-supply curve will shift to the left. The economy will return to its natural rate of output (point C).
d. According to the sticky-wage theory, nominal wages at points A and B are equal. However, nominal wages at point C are higher.
英语四级忘记准考证 e. According to the sticky-wage theory, real wages at point B are lower than real wages at point A. However, real wages at points A and C are equal.
f. Yes, this analysis is consistent with long-run monetary neutrality. In the long run, an increa in the money supply caus an increa in the nominal wage, but leaves the real wage unchanged.
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4. The idea of lengthening the shopping period between Thanksgiving and Christmas was to increa aggregate demand. As Figure 8 shows, this could increa output back to its long-run equilibrium level.
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Figure 8
5. a. The statement that "the aggregate-demand curve slopes downward becau it is
the horizontal sum of the demand curves for individual goods" is fal. The aggregate-demand curve slopes downward becau a fall in the price level rais the overall quantity of goods and rvices demanded through the wealth effect, the interest-rate effect, and the exchange-rate effect.
b. The statement that "the long-run aggregate-supply curve is vertical becau economic forces do not affect long-run aggregate supply" is fal. Economic forces of various kinds (such as population and productivity) do affect long-run aggregate supply. The long-run aggregate-supply curve is vertical becau the price level does not affect long-run aggregate supply.
c. The statement that "if firms adjusted their prices every day, then the short-run aggregate-supply curve would be horizontal" is fal. If firms adjusted prices quickly and if sticky prices were the only possible cau for the upward slope of the short-run aggregate-supply curve, then the short-run aggregate-supply curve would be vertical, not horizontal. The short-run aggregate supply curve would be horizontal only if prices were completely fixed.
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d. The statement that "whenever the economy enters a recession, its long-run aggregate-supply curve shifts to the left" is fal. An economy could enter a recession if either the aggregate-demand curve or the short-run aggregate-supply curve shifts to the left.hollande
6. a. According to the sticky-wage theory, the economy is in a recession becau the price level has declined so that real wages are too high, thus labor demand is too low. Over time, as nominal wages are adjusted so that real wages decline, the economy returns to full employment.
According to the sticky-price theory, the economy is in a recession becau not all prices adjust quickly. Over time, firms are able to adjust their prices more fully, and the economy returns to the long-run aggregate-supply curve.
According to the misperceptions theory, the economy is in a recession when the price level is below what was expected. Over time, as people obrve the lower price level, their expectations adjust, and the economy returns to the long-run aggregate-suppl
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