Long-Run Classical Macroequilibrium

Question 1

classical economic theory

Answer 1

when aggregate demand icnreases (people waant and are able to buy more things), this causes a shift to the right in the aggregate demand curve. the result of that shift is an increase in prices with no change in real output

Question 2

increase in purchasing power

Answer 2

will create higher demand for goods and services

Question 3

maximum output levels

Answer 3

classical economists believe that once it reaches this level, they remain at that level indefinitely

Question 4

increase in demand with no corresponding increase in supply

Answer 4

will result in higher prices

Question 5

increase in Supply Curve

Answer 5

increase real GDP and decrease APL

Question 6

and change in AD will have what effect in the LRAS equilibrium model

Answer 6

changes in aggregate price only

Question 7

what will happen in the LRAS

Answer 7

decrease aggregate price level and no change in real GDP

Question 8

decrease in this supply curve will have what affect

Answer 8

decrease real GDP and increase APL

Question 9

what is the reason classical economists believe that the LRAS curve is vertical

Answer 9

wages are flexible

Question 10

increase in Aggregate Demand will have what affect on the Supply Curve

Answer 10

increase in APL

Question 11

except

Answer 11

wages

Question 12

what will happen in the long-run

Answer 12

increase APL and no change in real GDP

Question 13

in SRAS, when output and price both are maxed out, what is the result

Answer 13

production will not be sustained