Question 1 Fill in the blanks to make the following statements correct. 1.1 In a short-run macro
Question:
Question 1
Fill in the blanks to make the following statements correct.
1.1 In a short-run macro model, it is assumed that factor prices are ___________ and the level of potential output is ______________. Changes in real GDP are caused by fluctuations in ____________ and __________.
1.2 When actual GDP is higher than potential GDP, we say that there is a(n) __________ gap. When actual GDP is less than potential GDP we say there is a(n) __________ gap.
1.3 The downward adjustment of wages in response to a recessionary gap is much __________ than the upward adjustment of wages in response to a(n) ___________ gap. Economists refer to this phenomenon as ______________.
1.4 Beginning with output equal to potential, suppose there is a drop in business confidence and investment falls. This is a ________ shock to the Canadian economy, which shifts the ___________curve to the left and creates a(n) gap. Unit costs will start to ____________and the ____________ curve will shift ___________. Long-run equilibrium will (slowly) be restored at _________ output and ____________ price level.
1.5 In the long run, total output is determined only by __________. In the long-run, aggregate demand determines the _____________.
1.6 A reduction in corporate income tax is likely to make __________ more attractive and thus shift the _____________ curve to the right. The result is a(n) ____________ in the short-run level of real GDP. In the long run, the greater rate of ____________ by firms will lead to a greater level of ___________.
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey