Question

QUESTION 1 Event: High Expectations about future income increase consumer spending (short run). Question: What is...

QUESTION 1

  1. Event: High Expectations about future income increase consumer spending (short run).

    Question: What is the change in aggregate demand?

    a.

    Increase

    b.

    Decrease

    c.

    No change

    d.

    Indeterminate

QUESTION 2

  1. Event: High expectations about future income increase consumer spending (Short run)

    Question: What is the change in short run aggregate supply (SRAS)?

    a.

    Increase

    b.

    Decrease

    c.

    No change

    d.

    Indeterminate

QUESTION 3

  1. Event: High expectations about future income increase consumer spending (Short run)

    Question: What is the change in long run aggregate supply (LRAS)?

    a.

    Increase

    b.

    Decrease

    c.

    No change

    d.

    Indeterminate

  

QUESTION 4

  1. Event: High expectations about future income increase consumer spending (Short run)

    Question: What is the change in equilibrium price level?

    a.

    Increase

    b.

    Decrease

    c.

    No change

    d.

    Indeterminate

QUESTION 5

  1. Event: High expectations about future income increase consumer spending (Short run)

    Question: What is the change in equilibrium real gross domestice product (RGDP)?

    a.

    Increase

    b.

    Decrease

    c.

    No change

    d.

    Indeterminate

Homework Answers

Answer #1

1. A. Increase

2. C. No change

3. C. No change

4. A. Increase

5. C. No change

Explanation: When consumption increases in the short-run, there is a rightward shift in the aggregate demand. However, supply cannot change immediately to meet the increased demand. In the long-run, supply can change only when there is an increase in production capacity. An increase in demand and a constant supply puts upward pressure on price; however, real GDP remains the same as output does not increase.

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