Aggregate supply expresses the relationship between
the price level in the economy and the aggregate output firms will produce, other things constant
The real wage represents the
quantity of goods and services a worker can purchase in exchange for work time
Suppose that the real wage remained unchanged between year 1 and 2 but the nominal wage increased from $20 to $24. What is true about the price level?
It rose by $20
If the economy were at its potential output level, which of the following would not be true?
Frictional unemployment would be zero.
Suppose this year's inflation rate is 4 percent, which is greater than the 2 percent everyone expected. Which of the following is true?
Potential output will stay the same
Among the reasons firms find it profitable to expand output in the short run when the price level is rising faster than expected is that
prices for firms' output are rising with the price level
Given implicit or explicit resource price agreements, if the actual price level is below the expected price level, the
economy will move leftward along the short-run aggregate supply curve
The steepness of the short-run aggregate supply curve depends primarily on
how quickly production costs increase as output expands
If the actual price level in Exhibit 11-2 is lower than the expected price level, then
equilibrium output might be Y2 in the short run
As an expansionary gap is closed in the long run by firms' actions,
output decreases and the price level increases
If the economy is simultaneously in long-run and short-run equilibrium, which of the following is not true?
The aggregate demand curve is horizontal at the potential output level.
A contractionary gap may be closed in the long run by a(n)
rightward shift of the short-run aggregate supply curve
In the short run, if the economy is operating below potential output and if the aggregate supply curve shifts outward, then the price level will
decrease and output will increase
Which of the following does not influence the position of the long-run aggregate supply curve?
the actual price level
Which of the following is true in the long run?
The price level is determined entirely by the aggregate demand curve.
If a contractionary gap exists and resource prices are not flexible downward, the short-run aggregate supply curve will
not shift rightward quickly to return the economy to its potential output