AP Macro Questions, thank you

Worksheet 3.7 - Long-Run Self Adjustment 1 . Please define the following terms: a. Long-run self-adjustment the process through which an economy will return to full employment output even without government intervention. b. Economic growth an increase in an economy's ability to produce goods and services. 2. The economy of Johnsrudia is experiencing a positive output gap caused by an increase in consumption. Describe the chain of events that would lead the economy to return to producing its full employment output. 3. What might prevent the self-correction mechanism from occurring? 4. During the 2008 recession in the United States, a decrease in consumption and investment spending lead to a decrease in aggregate demand. Describe the chain of events that would lead the economy to return to a long-run equilibrium.1. Assume that a country's economy is operating at less than full employment. (a) Draw a correctly labeled graph of aggregate demand and aggregate supply, and show each of the following. (i) Long-run aggregate supply curve (ii) Current output and price level (b) Assume that policy makers take no policy action and that prices and wages are flexible. Explain what will happen to each of the following. (i) Short-run aggregate supply (ii) Employment 3. Assume the economy of Andersonland is in a long-run equilibrium with full employment. In the short run, nominal wages are fixed. (a) Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply, and aggregate demand. Show each of the following (i) Equilibrium output, labeled Y1 (ii) Equilibrium price level, labeled PLI (b) Assume that there is an increase in exports from Andersonland. On your graph in part (a), show the effect of higher exports on the equilibrium in the short run, labeling the new equilibrium output and price level Yz and PL2, respectively. (c) Based on your answer in part (b), what is the impact of higher exports on real wages in the short run? Explain. (d) As a result of the increase in exports, export-oriented industries in Andersonland increase expenditures on new container ships and equipment. (i) What component of aggregate demand will change? (ii) What is the impact on the long-run aggregate supply? Explain