Adjustment of Factor Prices & Fiscal Stabilization Policy

Question 1

what type of adjustments are changes in the labor force

Answer 1

short run

Question 2

what lets us know a change is a long run change

Answer 2

when both labor and capital change

Question 3

how many variables is short run

Answer 3

one

Question 4

how many variables is long run

Answer 4

multiple the more variables the longer the run

Question 5

what is a recessionary output gap

Answer 5

when produces less than the potential output

Question 6

what is a inflationary output gap

Answer 6

when producers produce more then the potential output

Question 7

what happens after the initial shock

Answer 7

the economy tends to return to potential output

Question 8

why is it easy to raise wages

Answer 8

because its really unlikely the employee will disagree

Question 9

why is it hard to lower wages

Answer 9

because its really unlikely that the employee will agree

Question 10

what is downward wage rigidity

Answer 10

its easier to raise wages then it is to lower

Question 11

how can the government shorten recessions

Answer 11

by increasing the aggregate demand increase by ether lowering taxes or increasing gov spending

Question 12

automatic stabilizers

Answer 12

anything that increases aggregate expenditure during a recession that doesn’t need to be discussed