Chapter 14

Question 1

What is the Long-Run aggregate supply?

Answer 1

The LRAS shows the relationship between the quantity of g&s produced in the economy and the price level in the short run.

Question 2

What is the short-run aggregate supply?

Answer 2

This shows the relationship between G&S produced in the economy and the price level in the short run.

Question 3

What is the difference between the SRAS and LRAS?

Answer 3

The Long-Run Aggregate Supply (LAS) represents the relationship between the price level and output in the long-run. It differs from the Short-Run Aggregate Supply (SAS) in that no input prices are assumed to be constant. Thus, LAS is a representation of potential output.

Question 4

How is the LRAS changed?

Answer 4

It is changed by the supply of labor in an economy and the capital in the long run?

Question 5

What is the graphical representation of the LRAS?

Question 6

What is the graphical representation of SRAS?

Question 7

What happens in a short run increase?

Answer 7

The price level will result in an increase in the amoung of GandS that firms are willing and able to sell

Question 8

What is a short run decrease?

Answer 8

This will cause a decrease in the amount of G&S a firm is willing and able to sell

Question 9

What are three reasons for a positive relationship between the price level and Real GDP Supplied in the short term?

Answer 9

1. Contracts make some prices and wages sticky
2. Firms are often slow to adjust wages
   
   1. Menu costs makes some prices sticky
      1.

Question 10

What are Menu Cost?

Answer 10

This is the cost to a firm for changing the prices of something

Question 11

What is a factor that would cause a movement along the SRAS curve?

Answer 11

There is only one thing that will cause a movement along the SRAS and that is a change in the price level

Question 12

What are Factor(s) that will result in a shift in the SRAS curve?

Answer 12

Five things will Cause a shift and they are:

1. Increase in the labor force and in the capital stock
2. Technological changes
3. Expectations of changes in the price level
4. Adjustments of workers and firms to past expectations about the prive level
5. Unexpectedchanges in the price level of an important resource

Question 13

What would a shift in the SRAS look like?

Question 14

More defined reason for SRAS shift

Answer 14

The short-run aggregate supply curve is affected by production costs including taxes, subsidies, price of labor (wages), and the price of raw materials. All of these factors will cause the short-run curve to shift. When there are changes in the quality and quantity of labor and capital the changes affect both the short-run and long-run supply curves. The long-run aggregate supply curve is affected by events that change the potential output of the economy.

Changes in short-run aggregate supply cause the price level of the good or service to drop while the real GDP increases. In the long-run the prices stabilize and the price level of the good or service increase in response to the changes.

Source: Boundless. “Reasons for and Consequences of Shift in Aggregate Supply.” Boundless Economics. Boundless, 14 Nov. 2014. Retrieved 29 Apr. 2015 from https://www.boundless.com/economics/textbooks/boundless-economics-textbook/aggregate-demand-and-supply-24/the-aggregate-demand-supply-model-110/reasons-for-and-consequences-of-shift-in-aggregate-supply-423-12520/

Question 15

What is a supply shock?

Answer 15

A supply shock is an event that suddenly changes the price of a commodity or service. It may be caused by a sudden increase or decrease in the supply of a particular good. This sudden change affects the equilibrium price.

Question 16

What would the graphical representaiton of a supply shock look like?

Question 17

Graphically represent high aggregate demand and lower aggreagate demand

Question 18

Graphically represent short run equilibrium

Question 19

Graphically represent long run equilibrium

Question 20

What is macroeconomic equilibrium

Answer 20

This occurs when the quantity of real GDP demanded equals the quantity of real GDP supplied at the point of intersection of the AD curve and the SAS curve.

Question 21

What is long run macroeconomic equilibrium?

Answer 21

Long-run macroeconomic equilibrium occurs when real GDP equals potential GDP—when the economy is on its LAS curve.

This is where the LRAS and the SRAS and th AD intersect.

Question 22

What is it called whent the economy is at full employment

Answer 22

At Long run macro economic equilibrium

Question 23

What is a recession?

Answer 23

a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

The short run affect of deacrease in AD

Question 24

What is an expansion?

Answer 24

an increase in the level of economicactivity, and of the goods and services available.

A short run affect of increase in AD

Question 25

what is the graph of an economic expansion?

Question 26

What is the Short run economic recession

Question 27

What is stagflation?

Answer 27

persistent high inflation combined with high unemployment and stagnant demand in a country’s economy.

A situation where there is ainflation and recession at the same time

Question 28

What is the graph for stagflation

Question 30

What is aggregate demand curve?

Answer 30

The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide.

Question 31

What is the aggreagate Supply curve

Answer 31

In economics, aggregate supply is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy.

Question 32

What does aggregate mean?

Answer 32

a whole formed by combining several (typically disparate) elements.