Exam 26: Bringing in the Supply Side: Unemployment and Inflation

What would be the likely result of a recessionary gap? If this leads to a fall in the nominal wage what impact it would have on the aggregate supply curve and on recessionary gap?

The slope of the aggregate supply curve increases as output increases because

Inflation can be caused either by rapid growth rate of aggregate demand or by sluggish growth of aggregate supply.

Table 10-1 In Table 10-1, if full employment occurs at $3,400 billion, then

A decrease in the nominal wage will cause the aggregate supply curve to

Figure 10-1 If the price level in Figure 10-1 were 120,

When inflation occurs, net exports will

Describe the main explanations for the downward rigidity of wages in the modern macroeconomy. Evaluate their probability of being correct and important.

If the price level rises, what will happen to the level of real GDP supplied?

Using the concepts of aggregate demand and aggregate supply, explain how the economy reaches an equilibrium level of real GDP and price level.

Recessionary gap is the amount by which the equilibrium level of real GDP exceeds potential GDP.

Figure 10-4 In Figure 10-4, if full employment occurs at 5,000 and the price level is currently 130, then we can expect the

The reason that stagflation tends to follow an inflationary gap is that

The equilibrium price level and the equilibrium level of real GDP are jointly determined by the intersection of the economy's aggregate supply and aggregate demand schedules.

When the inflationary gap is finally eliminated, a long-run equilibrium is established with a ____ price level and with GDP ____ potential GDP.

Recessionary gaps are associated with output below potential and high unemployment rates.

When an inflationary gap exists, the job prospects of new college graduates are

The typical results of an adverse supply shock are lower output and higher inflation.

Distinguish between a movement along the aggregate supply curve and a shift of the entire aggregate supply curve. What factors cause each to occur?

If profit per unit equals (price − cost per unit) and costs are temporarily fixed, then the aggregate supply curve will have