2.4.3 Equilibrium level of real national output

Question 1

How does macroeconomic equilibrium occur?

Answer 1

macroeconomic equilibrium occurs when aggregate demand equals aggregate supply?

Question 2

what is short run macroeconomic equilibrium?

Answer 2

its when ad = sras but doesn’t equal lras

Question 3

what is long-run macroeconomic equilibrium?

Answer 3

its when ad = sras = lras

Question 4

how can a negative output gap be shown when y1 is less than yfe

Answer 4

it shows that the market is producing at y1 and in the short run it is producing less the yfe but this will not persist in the long run as yfe will be reached

Question 5

how can a positive output gap be shown when y1 is greater than yfe

Answer 5

It is when y1 is producing higher than yfe but at unsustainable levels in which workers work overtime.In the long run it will go back to yfe

Question 6

what happens in the long run

Answer 6

there will be no inflationary or output gaps as the economy is at the full level of output

Question 7

how does Keynesian show long run equilibrium?

Answer 7

wherever ad = lras could be long run equilibrium in the Keynesian model