Question
1. Suppose the economy is at full employment and workers expect the price level to increase in the future. Which of the following will happen
1. Suppose the economy is at full employment and workers expect the price level to increase in the future. Which of the following will happen in the short run?
The short-run aggregate supply curve will shift to the right.
Prices will decline.
Unemployment will decline.
Output will decline.
2. Consumer confidence in the economy has fallen. How will this affect aggregate demand and equilibrium in the short run?
Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise.
Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.
Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.
Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.
3. If the short-run aggregate supply decreases by less than the long-run aggregate supply, then, at the short-run equilibrium
GDP will be equal to potential GDP.
GDP will be below potential GDP.
aggregate demand will decrease.
aggregate demand will increase.
GDP will be above potential GDP.
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