Question

Explain how economy adjusts back to long-run equilibrium. When the economy has adjusted back to long-run...

Explain how economy adjusts back to long-run equilibrium. When the economy has adjusted back to long-run equilibrium, how have the values of each of the following changed relative to what were before the increase in exports:

I.        The real GDP

II.       The price level

III.      The unemployment rate.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume that the economy of Fruitland is a long-run equilibrium with full employment. In the short...
Assume that the economy of Fruitland is a long-run equilibrium with full employment. In the short run, nominal wages are fixed. (a) Assume that there is an increase in exports from Fruitland. Explain the effect of higher exports on the following in the short run:             (i) Real GDP (ii) Price Level (b) Based on your answer in part (a), what is the impact of higher exports on real wages in the short run? Explain.       (c) As a result of...
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...
Suppose the economy is in long run equilibrium, with real GDP at $19 trillion and the...
Suppose the economy is in long run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. now assume that the central bank unexpectedly decreases the money supply by 6%. A. Illustrate the short run effects on the macroeconomy by using the aggregate demand-aggregate supply model. Be sure to indicate the direction of change in real GDP, the price level and the unemployment rate B. Illustrate the long run effects on the macroeconomy by using the aggregate...
1o. What happens in the long run, if the economy self adjusts, to: Output?____ Unemployment? _________...
1o. What happens in the long run, if the economy self adjusts, to: Output?____ Unemployment? _________ Price level? ___________ 1r. What policies could the government use to stabilize the economy? 1k. How would these policies work? 1s. What happens in the long run, if the government uses policy, to: Output?_________ Unemployment? _____________ Price level? _____________ 1t
1. In going from the short run equilibrium to the long-run equilibrium, briefly explain how the...
1. In going from the short run equilibrium to the long-run equilibrium, briefly explain how the composition of real GDP may have changed. 2. Briefly explain what the difference in the growth rate of potential GDP might occur If instead of a decrease in the net tax rate, there was an increase in government purchases. 3. Briefly explain what the “Money Neutrality” argument implies about the effectiveness of discretionary fiscal policy and the impact on potential real GDP and price...
5- If an economy is in short-run equilibrium where the level of real GDP is less...
5- If an economy is in short-run equilibrium where the level of real GDP is less than potential output, then, in the long run, one will find: A-Nominal wages will rise and the SRAS curve will shift left bringing the economy back to its potential real GDP. B-Nominal wages will rise shifting the AD curve to the right and restoring real GDP to its potential level C-Nominal wages will fall and the SRAS curve will shift right bringing the economy...
Suppose the economy is in long-run equilibrium. In a short span of time, there is an...
Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the number of highly educated workers and an improvement in farming technologies related to growing corn. In the short run, we would expect the price level to rise and real GDP to fall. the price level to fall and real GDP to rise. the price level to fall and real GDP to fall. the price level and real GDP both to stay...
Suppose the economy is in long-run equilibrium. In a short span of time, there is a...
Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen? Select one: a. the price level to fall, and real GDP to remain unchanged b. the price level to remain unchanged, and real GDP to fall c. the price level to fall, and the real GDP to rise the same d. the price level to rise, and real...
Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the unemployment...
Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the unemployment rate at 5%. Now assume that the central bank increases the money supply by 6%. a. Illustrate the short-run effects on the macro-economy by using the aggregate supply-aggregate demand model. Be sure to indicate the direction of change in Real GDP, the Price Level, and the Unemployment Rate. Label all curves and axis for full credit.
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that...
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that in this economy, there is an adverse (i.e. negative) supply shock. Additionally, there is an increase in people’s expectations about future inflation. Considering the Phillips Curve, answer what will happen to: i)    The inflation rate. ii)    The unemployment rate. In the short-run for such an economy. Inflation will increase; unemployment will increase. Inflation will decrease; unemployment will decrease. Inflation will increase; unemployment will decrease....