ADAS model

Question 1

The short run

Answer 1

The period of time when prices of resources are constant or inflexible, but product prices can adjust

Question 2

The long run

Answer 2

The period of time when prices of all resources, including the price of labour (wage) are flexible and changes in the average price level

Question 3

Inflationary gap

Answer 3

When Yp > Ye

Question 4

Deflationary gap

Answer 4

When Yp < Ye

Question 5

Unemployment types

Answer 5

Structural, Frictional and Seasonal

Question 6

Structural unemployment

Answer 6

When worker does not have skillset for job

Question 7

Frictional unemployment

Answer 7

When worker is temporarily between jobs

Question 8

Seasonal unemployment

Answer 8

When worker loses job temporarily due to work only being available at certain times of year

Question 9

Movement along AD curve caused by

Answer 9

Wealth effect
Interest rate effect
International trade effect

Question 10

Movement along SRAS curve caused by

Answer 10

Cost of production changes
- Wages
- Non labour resources prices
- Business taxes
- Subsidies offered to business
- Supply shocks
- Natural disasters

Question 11

Decrease in SRAS

Answer 11

Increase cost of production

Question 12

Stagflation

Answer 12

Stagnant or slow growth of economic growth
High inflation
High unemployment

Question 13

Movement along LRAS curve caused by

Answer 13

Change in quality and/or quantity of resources, productivity, tech
- Increase in quantity of resources
- Improvement in quality of resources
- Improvement in technology