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The dilemma is that an expansionary fisc...View Answer
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The dilemma is that an expansionary fisc...
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(a)What will be the short-run level of...View Answer
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(a)What will be the short-run level of...
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The Laffer Curve has been the subject of...View Answer
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The Laffer Curve has been the subject of...
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(b)Explain how the recessionary gap ca...View Answer
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(b)Explain how the recessionary gap ca...
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The short-run aggregate supply curve wil...View Answer
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The short-run aggregate supply curve wil...
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(a)What is this diagram called and wha...View Answer
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(a)What is this diagram called and wha...
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The Laffer Curve indicates that the rela...View Answer
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The Laffer Curve indicates that the rela...
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(a)What will be the short-run level of...View Answer
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(a)What will be the short-run level of...
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11ea82f3_ffaa_d175_9299_27127af3bee2_TB2474_00 The Phillips Curve concept shows a stable inverse relationship between the rate of unemployment and the rate of inflation.It is based on the idea that as aggregate demand increases when real GDP is relatively low,unemployment will decline and real GDP will rise with little or no inflationary effect.However,as aggregate demand continues to grow and the unemployment rate approaches full-employment,the price level and real GDP will increase.See graph below. 11ea82f3_ffaa_d176_9299_8739e0a39130_TB2474_00
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11ea82f3_ffaa_d175_9299_27127af3bee2_TB2474_00 The Phillips Curve concept shows a stable inverse relationship between the rate of unemployment and the rate of inflation.It is based on the idea that as aggregate demand increases when real GDP is relatively low,unemployment will decline and real GDP will rise with little or no inflationary effect.However,as aggregate demand continues to grow and the unemployment rate approaches full-employment,the price level and real GDP will increase.See graph below. 11ea82f3_ffaa_d176_9299_8739e0a39130_TB2474_00
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Stagflation is the presence of both infl...View Answer
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Stagflation is the presence of both infl...
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First,under normal circumstances,there i...View Answer
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First,under normal circumstances,there i...
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The equilibrium real GDP and price level...View Answer
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The equilibrium real GDP and price level...
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When the actual rate of inflation is hig...View Answer
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When the actual rate of inflation is hig...
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A recession occurs when the aggregate demand curve shifts left.As the price level decreases from the full-employment level of output,revenues to the firm decrease,and because nominal wages are fixed,the profits for firms will decrease.Firms will have an incentive to decrease output and employment (to reduce labour cost),so real GDP will decrease and unemployment will rise above its natural rate.This situation is a short-run one,however,because nominal wages (and other input prices)will eventually decrease and shift the short-run aggregate supply curve to the right.The new equilibrium will return to the full-employment level of output but be at a lower price level.
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A recession occurs when the aggregate demand curve shifts left.As the price level decreases from the full-employment level of output,revenues to the firm decrease,and because nominal wages are fixed,the profits for firms will decrease.Firms will have an incentive to decrease output and employment (to reduce labour cost),so real GDP will decrease and unemployment will rise above its natural rate.This situation is a short-run one,however,because nominal wages (and other input prices)will eventually decrease and shift the short-run aggregate supply curve to the right.The new equilibrium will return to the full-employment level of output but be at a lower price level.
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Demand-pull inflation occurs when an inc...View Answer
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Demand-pull inflation occurs when an inc...
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Cost-push inflation is caused by an incr...View Answer
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Cost-push inflation is caused by an incr...
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The long-run aggregate supply curve will be vertical at the full-employment level of output.Changes in the price level will not affect the full-employment level of output in the long-run.Changes in the short-run aggregate supply curve will define the long-run aggregate supply curve at the full-employment level of output.
With the short-run aggregate supply curve,as the price level increases from the full-employment level of output along the curve,revenues to the firm increase because nominal wages are fixed,and the profits for firms will rise.Firms will have an incentive to increase output and employment (hiring temporary or part-time workers or paying for overtime),so real GDP will increase and unemployment will fall below its natural rate.This situation is a short-run one because nominal wages (and other input prices)will eventually increase and shift the short-run aggregate supply curve to the left.The new equilibrium will return to the full-employment level of output,but at a higher price level.
Conversely,as the price level decreases from the full-employment level of output,revenues to the firm decrease and because nominal wages are fixed,the profits for firms will decrease.Firms will have an incentive to decrease output and employment,so real GDP will decrease and employment will fall below its natural rate.This situation is a short-run one because nominal wages (and other input prices)will eventually decrease and shift the short-run aggregate supply curve to the right.The new equilibrium will return to the full-employment level of output,but at a lower price level.
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The long-run aggregate supply curve will be vertical at the full-employment level of output.Changes in the price level will not affect the full-employment level of output in the long-run.Changes in the short-run aggregate supply curve will define the long-run aggregate supply curve at the full-employment level of output.
With the short-run aggregate supply curve,as the price level increases from the full-employment level of output along the curve,revenues to the firm increase because nominal wages are fixed,and the profits for firms will rise.Firms will have an incentive to increase output and employment (hiring temporary or part-time workers or paying for overtime),so real GDP will increase and unemployment will fall below its natural rate.This situation is a short-run one because nominal wages (and other input prices)will eventually increase and shift the short-run aggregate supply curve to the left.The new equilibrium will return to the full-employment level of output,but at a higher price level.
Conversely,as the price level decreases from the full-employment level of output,revenues to the firm decrease and because nominal wages are fixed,the profits for firms will decrease.Firms will have an incentive to decrease output and employment,so real GDP will decrease and employment will fall below its natural rate.This situation is a short-run one because nominal wages (and other input prices)will eventually decrease and shift the short-run aggregate supply curve to the right.The new equilibrium will return to the full-employment level of output,but at a lower price level.
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An increase in aggregate demand will cau...View Answer
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An increase in aggregate demand will cau...
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As the Canadian economy has grown,the lo...View Answer
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As the Canadian economy has grown,the lo...
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The basic tenet of supply-side economics...View Answer
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The basic tenet of supply-side economics...
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