What is the shape of the intermediate zone of the AD-AS curve? horizontal upward-sloping downward-sloping When...
What is the shape of the intermediate zone of the AD-AS curve?
| horizontal |
| upward-sloping |
| downward-sloping |
When does the GDP gap shrink?
| It shrinks as the government reduces the budget deficit through discretionary fiscal policy. |
| It shrinks as the economy recovers from recession. |
| It shrinks as the economy is contracting with government intervention. |
Since the change in GDP is a greater change than in the expenditure model the multiplier has a value ________.
| greater than one |
| equal to one |
A rightwards shift of the AD curve along the Neoclassical portion of the aggregate supply curve will result in
| a decrease in the price level. |
| an increase in the price level. |
| no effect on the price level. |
| less than one |
Homework Answers
1.
The intermediate zone in the middle of the SRAS curve is upward-sloping.
2.
The difference between potential GDP and real GDP is known as the GDP gap. It is positive during recession meaning that economy is operating at less than potential value) and negative during boom meaning the economy is operating at greater than potential value.
If the economy is recovering from recession, GDP gap shrinks as the difference between potential GDP and real GDP decreases.
3.
Multiplier is greater than 1 for larger effect on real GDP.
4.
Increased price level and increased output due to the rightwards shift of the AD curve.
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What...
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