/A o. The long-run equilibrium price level is t the price level the b. Fed has s
ID: 1109531 • Letter: #
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/A o. The long-run equilibrium price level is t the price level the b. Fed has stabilized interest rates economy is expected to o. federal budget is balanced d. discount rate equals the prime rate Which of the a an increase in the a b. an improvement in technol c. a civil war d. a decrease in aggregate demand If the unintended change in inventories equals zero, the economy is at its equilibrium demanded. a. True b. False 11. wing would shift the L.RAS curve to the leftr? would 12. level of real GDP 13. The larger the MPC, the greater the multiplier effect a. True b. False Aggregate supply reflects billions of production decisions made by a. the largest firms and largest households b. households, which demand resources, and firms, which supply resources c. resource suppliers and firms d. households and firms, because they each demand goods and services 14. 15. Consumption plus saving equals disposable income at every level of real GDP demanderd. a. True b. False The simple spending multiplier a. when divided by consumption spending equals saving b. is defined as one divided by the marginal propensity to save c. is defined as one divided by the marginal propensity to consume d. is equal to the MPS plus the MPC 16.Explanation / Answer
10. a. The long run price level equilibrium occurs at the intersection of AD and LRAS which gives us the equilibrium real GDP (potential output) and the price level.
11. c. LRAS gives us the potential output. It occurs when the productivity of labor is at its highest. A civil war will affect the potential output because the production will decrease in an economy.
options a and b will cause the LRAS to shift out, whereas, d will be a movement along LRAS. Therefore, these options are incorrect.
12.True. Economy is in equilibrium when C+I+G=Y. I= planned investment,i.e., when unplanned inventory change is zero.
13. True. The larger the MPC, greater will be the multiplier effect.
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