Reading 23: Aggregate Supply and Aggregate Demand-LOS c 习题精 2011, economic, between, demand, center

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Session 5: Economics: Market Structure and Macroeconomic Analysis
Reading 23: Aggregate Supply and Aggregate Demand

LOS c: Differentiate between short-run and long-run macroeconomic equilibrium and explain how economic growth, inflation, and changes in aggregate demand and supply influence the macroeconomic equilibrium.

 

 

If the economy is in short-run disequilibrium below full employment, the most likely explanation is that:

A) money wage rates have decreased.

B) long-run aggregate supply has decreased.

C) aggregate demand has decreased.

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A decrease in aggregate demand can reduce output below its full-employment level. A decline in long-run aggregate supply would mean the full-employment output level itself has decreased. Wage rates are assumed to be fixed in the short run, but the long-run effect of decreases in wage rates would be to increase (shift) short-run aggregate supply, leading to an increase in output.

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If the economy is in short-run equilibrium above the full-employment level of output, what is the most likely adjustment that will restore the economy to long-run equilibrium?

A) The price level for final goods and services will decrease.

B) Money wages and resource prices will increase.

C) Aggregate demand will shift down and to the left.

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Because we assume money wages and resource prices to be constant in the short run, the economy can be in short-run equilibrium but long-run disequilibrium. Changes in money wages and resource prices are the factor that adjusts output back toward long-run equilibrium. If short-run equilibrium is above the full-employment level, aggregate demand has grown faster than long-run aggregate supply, so the price level has increased. With money wages constant in the short run, the rising price level has reduced workers’ real wages. As a result they will increase their wage demands. As producers increase the money wages they pay (note that our focus now changes from the short run to the long run), their costs increase, and they will supply less output at each price level. This represents a decrease in short-run aggregate supply (a shift left to a new SAS curve) and a move along the aggregate demand curve, increasing the price level further and reducing output to its full-employment level.

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An economy has been producing at its full-employment level of output and the price level has been stable. Businesses then begin experiencing unintended decreases in their inventory levels. What does this most likely imply about the short-run outlook for economic growth and inflation?

Economic growth

Inflation

A) Increasing Decreasing

B) Increasing Increasing

C) Decreasing Increasing

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Starting from conditions of long-run equilibrium, unintended decreases in inventory levels suggest that aggregate demand has increased. Producers will respond in the short run by increasing output and prices, so economic growth and inflation will increase.