Question

2. Match the following terms with their definitions Answers Misperceptions Theory Exchange-rate effect Interest-rate effect Sticky-Wage Theory Full-employment output Options The production of goods and services that an economy achieves in the long run when unemployment is at its normal rate a. b. The short-run aggregate supply curve slopes upward because nominal wages are slow to adjust to changing economic conditions. When a fall in the U.S. price level causes U.S. interest rates to fall, the real value of the dollar declines in foreign exchange markets. This depreciation stimulates U.S. net exports and thereby increases the quantity of goods and services demanded. C. d. Changes in the overall price level can temporarily mislead suppliers about what is happening in the individual markets in which they sell their output. A lower price level reduces the interest rate, encourages greater spending on investment goods, and thereby increases the quantity of goods and services e. demanded

Answer 1

Ans: Misperceptions theory : d. Changes in the overall price level can temporarily mislead suppliers about what is happening in the individual markets in which they sell their output.

Ans: Exchange rate effect: c. when a fall in the U.S price level causes U.S interest rate to fall, the real value of the dollar declines in the foreign exchange markets. this depreciation stimulates U.S net exports and thereby increases the quantity of goods and services demanded.

Ans: Interest rate effect: e. A lower price level reduces the interest rate, encourages greater spending on investment goods, and thereby increases the quantity of goods and services demanded.

Ans: Sticky wage theory: b. The short-run aggregate supply curve slopes upward because nominal wages are slow to adjust to changing economic condition.

Ans: full employment output: a. The production of goods and services that an economy achieves in the long run when the unemployment is at its normal rate.