41. As actual output rises above the potential level, which of the following mus
ID: 1228318 • Letter: 4
Question
41. As actual output rises above the potential level, which of the following must be true?
a.
more resources become unemployed
b.
prices remain constant
c.
real GDP rises
d.
nominal GDP remains constant
e.
production falls
42. An expansionary gap is equal to
a.
real GDP minus nominal GDP
b.
nominal GDP minus real GDP
c.
actual short-run output minus potential output
d.
this period's nominal GDP minus last period's nominal GDP
e.
this period's real GDP minus last period's real GDP
43. The situation in which actual output exceeds potential output
a.
is impossible because all resources are employed to produce potential output
b.
is possible only in times of high unemployment
c.
is possible only if the unemployment rate is negative
d.
is possible only in the long run
e.
creates pressure for inflation
Exhibit 11-2
44. If the actual price level in Exhibit 11-2 exceeds the expected price level, then
a.
equilibrium output might be Y2 in the short run
b.
equilibrium output might be Y1 in the short run
c.
equilibrium output might be Y3 in the short run
d.
potential output is greater than actual output
e.
unemployment is above the natural rate
45. In Exhibit 11-2, an expansionary gap would be represented by the distance
a.
Y2 - Y1
b.
Y3 - Y1
c.
Y2 - Y3
d.
P3 - P1
e.
P2 - P3
46. If the actual price level in Exhibit 11-2 is lower than the expected price level, then
a.
equilibrium output might be Y2 in the short run
b.
equilibrium output might be Y1 in the short run
c.
equilibrium output might be Y3 in the short run
d.
potential output is less than actual output
e.
unemployment is below the natural rate
47. Aggregate supply describes the relationship between
a.
price level and real GDP
b.
nominal and real GDP
c.
real GDP and the level of production
d.
nominal GDP and the level of output
e.
the level of output and income
Exhibit 11-3
48. Consider Exhibit 11-3. In this situation, long-run equilibrium would be established by a(n)
a.
increase of short-run aggregate supply to close the expansionary gap
b.
decrease of short-run aggregate supply to close the expansionary gap
c.
decrease of short-run aggregate supply to close the contractionary gap
d.
increase of short-run aggregate supply to close the contractionary gap
e.
rightward shift of the aggregate demand curve
49. If the economy is experiencing an expansionary gap, which of the following will occur in the long run?
a.
Workers will negotiate nominal wage increases that will shift the SRAS curve to the left.
b.
Workers will negotiate nominal wage increases that will shift the SRAS curve to the right.
c.
Employers will negotiate lower nominal wages (relative to prices) that will shift the SRAS curve to the right.
d.
Employers will negotiate lower nominal wages (relative to prices) that will shift the SRAS curve to the left.
e.
Aggregate demand will fall because workers' incomes are rising.
50. Which of the following would be strong evidence that an expansionary gap exists?
a.
Rapid inflation during a period when plant capacity utilization is below average.
b.
A steady price level and a 5 percent unemployment rate.
c.
Help wanted advertising is higher than usual, and the consumer price index is up more than expected.
d.
Inflation has slowed markedly and the Dow Jones average is at record levels.
e.
The number of new unemployment claims has skyrocketed and the price level is falling.
a.
more resources become unemployed
b.
prices remain constant
c.
real GDP rises
d.
nominal GDP remains constant
e.
production falls
Explanation / Answer
41. As actual output rises above the potential level,
c. real GDP rises.
Because, in this case there will be a expansionary gap. That means economy expands.
42. An expansionary gap is equal to
c. actual short-run output minus potential output.
In this case actual output is more than potential output.
43. The situation in which actual output exceeds potential output
e. Creates pressure for inflation.
Because in thsi case as output is more than potential output, price level is also higher than initial level.
And as we know, inflation is changes in price level.
47. Aggregate supply describes the relationship between
a. price level and real GDP.
49. If the economy is experiencing an expansionary gap, then in the long run,
a. Workers will negotiate nominal wage increases that will shift the SRAS curve to the left.
Because in the case of an expansionary gap, actual output is more than potential output, so worker produces more output.
50. c. Help wanted advertising is higher than usual, and the consumer price index is up more than expected would be strong evidence that an expansionary gap exists.
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