Version B S-ECON103 Figure l Price level (P) es 82 Y2 Y3Real GDP (Y) 6. Refer to
ID: 1132370 • Letter: V
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Version B S-ECON103 Figure l Price level (P) es 82 Y2 Y3Real GDP (Y) 6. Refer to Figure 1. According to the figure, if the economy started at full-employment output,. in the short expansionary monetary policy would cause real gross domestic product (GDP) to d. increase from Y: to Y e. increase from Yi to Y a. increase from Yi to Y b. decrease from Ys to Y e. decrease from Y2 to Y short-run effects; initially. 7. Refer to Figure 1. Expansionary monetary policy can have immediate real no prices have adjusted. But as prices adjust in the long run, the real impact of monetary policy a. is multiplied b. is negative. c. dissipates completely. e. is cut in half. 8. An institutional breakdown in U.S. financial markets would tend to cause a. long-run aggregate supply to decrease b short-run aggregate supply to increase. c. long-run aggregate supply to increase. d. aggregate demand to decrease. e. aggregate demand to increase. 9. Workers who lose their jobs because of market innovations are considered a. discouraged workers. b. structurally unemployed c. frictionally unemployed. d. empl e. cyclically unemployed. -10. what is meant by the term-sticky prices"? a. In the short run, suppliers expect future prices to remain constant b. In the long run, people demand constant real wages. In the short run, contracts, loans, and wages are often fixed. d. In the long run, suppliers expect future prices to remain constant e. In the long run, contracts, loans, and wages are often fixed. c. Page 2 /11Explanation / Answer
6..)
Expansionary monetary policy will lead to the rise in output level. In short run, monetary policy affects the real variables. Hence, economy will move from Y2 to Y3. Y2 level denotes the full employment level.
Right answer is : (D)
7)
Right answer is : (C)
In long run real impact would dissipates and economy again will come to its equilibrium point.
8)
Right answer is : (a)
Institutional breakdown would cause aggregate supply to decrease in long run.
Institutional breakdown will affect innovation and technological development negatively in long run. That would affect the supply curve adversely.
9)
Right answer is : (B)
Some workers get out of market due to new innovations in market. Their skills and expertise become obsolete.
10)
Right answer is : (C)
Sticky prices imply the fixed rate of either wage or contract. These do not change in short run due to legal nature and trade union. Sticky prices are held responsible for wider unemployment during the recession.
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