1,2,3. real / nominal 4. the quantatiy theory / the classical dichotomy / moneta
ID: 1116346 • Letter: 1
Question
1,2,3. real / nominal
4. the quantatiy theory / the classical dichotomy / monetary neutrality
5. supply / demand / price level
6. supply / demand
2. Explaining short-run economic fluctuations Most economists believe that real economic variables and nominal economic variables behave independently of one another in the long run. For example, an increase in the money supply, a level, a economy can produce, a price level but not the output level is known as variable, will cause the pricee variable, to increase but will have no long-run affect on the quantity of goods and services the variable. The notion that an increase in the quantity of money will impact the In the short run, however, most economists believe that real and nominal variables are intertwined. For example, most economists believe that a decrease in the quantity of money will reduce the demand for goods and services in the short run, temporarily reducing the number of goods and services that firms produce. Eventually, prices adjust to the lower quantity of money and output returns to its long-run level. But in the short run, the change in the quantity of money pushes output away from its long-run level The economy's long-run output level is determined by labor, human capital, physical capital, natural resources, and technological knowledge. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The graph below shows an incomplete short-run aggregate demand and aggregate supply diagram-it needs appropriate labels for the axes and curves. You will identify some of the missing labels in the questions that follow VERTICAL AXIS Orange Curve Blue Curve HORIZONTAL AXIS The vertical axis of the aggregate demand and aggregate supply model measures the overall curve shows the quantity of output that households, firms, the government, and The aggregate foreign customers want to buy at each price levelExplanation / Answer
For example an increase in the money supply, a nominal variable will cause the price level a …NOMINAL….will cause the price level a NOMINAL Variable, to increase but will have no-long effect on the quantity of goods and services the economy can produce a REAL…. Variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as…CLASSICAL DICHOTOMY.
The vertical axis of the aggregate demand and aggregate supply model measures the overall….PRICE LEVEL. the aggregate…SUPPLY. Curve shows the quantity of output that households, firms the government and foreign customers want to buy at each price level.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.