Question

Why do changes in the price level increase short run economic output? Why do changes in...

Why do changes in the price level increase short run economic output? Why do changes in the price level decrease short run economic output? Why don’t changes in the price level have long run impacts on economic growth?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

In the short run , the rise in the price denotes the increase in the profit earning prospects of the firm. In short run the wage rate is fixed , hence the cost will not rise as output rises. So in short run , the profit could be increased by increasing the output.

In the long run , the determinants of output are the level of employment and productivity. The changes in price does not affect the output in long run due to which LRAS curve is vertical in shape. Hence the price level will not determine the output in long run.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If a short-run equilibrium occurs at a level of output above the long-run level of aggregate...
If a short-run equilibrium occurs at a level of output above the long-run level of aggregate supply, then in the transition to the long run what will happen to the price level and to the LM curve?
CHAPTER 9 MACRO (20 ECON) Aggregate Price Level Output (short-run aggregate supply) Output (aggregate demand) 150...
CHAPTER 9 MACRO (20 ECON) Aggregate Price Level Output (short-run aggregate supply) Output (aggregate demand) 150 1000 200 + 200 = 400 125 800 400 + 200 = 600 100 600 600 + 200 = 800 75 400 800 + 200 = 1000 50 200 1000 + 200 = 1200 D. Short-run aggregate supply needs to decrease by __ at every price in order for the economy to return to long-run equilibrium at an output of 600. The aggregate price...
Explain how the following changes in aggregate demand or short-run aggregate supply, other things held unchanged,...
Explain how the following changes in aggregate demand or short-run aggregate supply, other things held unchanged, are likely to affect the level of total output and the price level in the short run. to. An increase in aggregate demand b. A decrease in aggregate demand c. An increase in short-run aggregate supply d. A reduction in short-run aggregate supply
The reason why, beyond some output level, the short-run variable and short-run total cost curves begin...
The reason why, beyond some output level, the short-run variable and short-run total cost curves begin to increase at an increasing rate, or equivalently, the short-run marginal cost curve begins to rise is Select one: a. increasing returns to scale b. diminishing marginal product c. decreasing returns to scale d. diminishing marginal rate of technical substitution
Consider an economy which is in the long-run and short-run equilibrium. Propose a factor that will...
Consider an economy which is in the long-run and short-run equilibrium. Propose a factor that will lead to a decrease in the general price level and an increase in the real GDP at the same time in the short run while the LRAS curve remains unchanged. You should clearly state the factor, how the factor changes (increase or decrease) and explain how it shifts the relevant curve in the P-Y space leading to a decrease in the general price level...
Assume Tim Horton is currently earning short-run economic profits.   Show and explain its profit maximization output,...
Assume Tim Horton is currently earning short-run economic profits.   Show and explain its profit maximization output, price and short run economic profit.   Answer: What will happen to Tim Horton economic profit in the long run? explain. Answer: In Long run, would Tim Horton produce the productively efficient output? Explain. Answer:
1. Describe and briefly explain whether the following changes cause the short-run aggregate supply to increase,...
1. Describe and briefly explain whether the following changes cause the short-run aggregate supply to increase, decrease or neither: a. The price level increases b. Input prices decrease c. Firms and workers expect the price level to fall. d. The price level decreases e. New policies increase the cost of meeting government regulations. f. The number of workers in the labor force increases.
After an increase in autonomous? spending, in the long? run, changes in the price level A....
After an increase in autonomous? spending, in the long? run, changes in the price level A. will not affect the multiplier. B. will make the AE curve flatter. C. will reduce the effect of the multiplier. D. will make the AE curve steeper.
Economists estimate that the short-run price elasticity of demand for gasoline is -0.3, and the long-run...
Economists estimate that the short-run price elasticity of demand for gasoline is -0.3, and the long-run price elasticity of demand is -1.5. If the government increases the gas tax, demand for gasoline will Group of answer choices decrease less in the long-run than in the short-run. increase in the short-run and decrease in the long-run. decrease in the short-run and increase in the long-run. decrease more in the long-run than in the short-run.
Which of the following explains why it’s possible to temporarily achieve output levels beyond the economy’s...
Which of the following explains why it’s possible to temporarily achieve output levels beyond the economy’s long-run potential? a. In the long run, anticipated increases in the price level decrease resource costs relative to product prices increasing profit margins and incentivizing firms to increase output to boost their profits. b. In the short run, unanticipated increases in the price level will increase resource costs relative to product prices making profit margins abnormally low and incentivizing firms to increase output to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT