question archive 1) Suppose the economy is in long-run equilibrium
1) Suppose the economy is in long-run equilibrium
Subject:EconomicsPrice:2.87 Bought7
1) Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to
A. rise. This rise in price expectations shifts the short-run aggregate supply curve to the right.
B. fall. This fall in price expectations shifts the short-run aggregate supply curve to the left.
C. rise. This rise in price expectations shifts the short-run aggregate supply curve to the left.
D. fall. This fall in price expectations shifts the short-run aggregate supply curve to the right
2) Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because
a. monetary neutrality would mean that neither prices nor production should have risen.
b. monetary neutrality would mean the prices should have risen, but production should not have changed.
c. monetary neutrality would mean that prices and production should both have fallen.
d. monetary neutrality would mean that production should have risen, but prices should not have.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
1.
rise. This rise in price expectations shifts the short-run aggregate supply curve to the left.
AD=C+I+G
Whenever the government expenditure rises, the aggregate demand shifts to the right. t This rise in price expectations shifts the short-run aggregate supply curve to the left
2.
Ans.- (B)
Monetary neutrality means that a change in the money supply affects only nominal variables leaving all real variables unchanged. Nominal variables include price. So, a change in the money supply affects price level. Real variables include output, employment etc. So, a change in the money supply won't affect output, employment.
