Suppose the economy is initially in long-run equilibrium. A decrease in aggregate demand will

Question

BlackTom AI · Accepted Answer

Consider the scenario: the economy starts in long-run equilibrium. A decrease in aggregate demand reduces the overall price level and real GDP in the short run, but in the long run the economy tends to return to its potential output with higher unemployment temporarily.
Option a: permanently move the economy into an inflationary gap. This is unlikely because a decrease in AD reduces inflationary pressures, not increases them; an inflationary gap would require AD to rise or SRAS to shift left, not fall.
Option b: permanently move the economy into a recessionary gap. While the economy may temporarily sit in a recessionary gap with output below potential, the word permanently is not appropriate here due to self-correcting tendencies of LRAS and price adjustments that move the economy back toward potential output in the long run.
Option c: temporarily move the economy into a recessionary gap. This aligns with standard AD-AS analysis: a negative AD shock lowers equilibrium output and price level in the short run, creating a recessionary gap; as wages and prices adjust, the economy tends to move back toward potential output, restoring the long-run equilibrium.
Option d: temporarily move the economy into an inflationary gap. An inflationary gap would require AD to rise or SRAS to shift left, increasing output and pressure on prices; a decrease in AD does not create this scenario.
Option e: not result in either a recessionary or inflationary gap. This would ignore the immediate short-run effect of a negative AD shock, which typically creates a gap (often recessionary) before adjustments restore long-run equilibrium.
In summary, the option stating a temporary recessionary gap best captures the standard short-run response to a downward AD shift while recognizing a return toward potential output in the long run.

Academic Courses Test#3

Suppose the economy is initially in long-run equilibrium. A decrease in aggregate demand will

查看解析

登录即可查看完整答案

类似问题

Assuming other factors being constant, a fall in imports results in a fall in aggregate demand.

In the long-run persistent increases in aggregate demand will:

The downward slope of the aggregate-demand curve shows that:

Assuming other factors being constant, a rise in exports results in a fall in aggregate demand.

In the short run, a decrease in personal income taxes will result in _________________.

Suppose 𝑎 ¯ 𝑐 = 0.75 , 𝑎 ¯ 𝑖 = 0.18 , 𝑎 ¯ 𝑔 = 0.18 , 𝑎 ¯ 𝑒 𝑥 = 0.13 , and 𝑎 ¯ 𝑖 𝑚 = 0.17 . Aggregate demand is 𝑎 ¯ = ______.

Using the aggregate demand-aggregate supply model, predict what happens in the short run when the consumer confidence index falls as consumers become pessimistic about their economic prospects.

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单