Macro Quiz #3

If an economy is at its potential output level, which of the following is not true? a. The economy is at its full-employment output level. b. Unemployment is at the natural level. c. The price level is zero. d. The output level being produced can be sustained indefinitely given the economy's resources and technology. e. The only unemployment is frictional, structural, or seasonal.

The price level is zero

If the economy is experiencing an expansionary gap, what will occur in the long run?

Workers will negotiate nominal wage increases that will shift the SRAS curve to the left.

What would remove an expansionary gap?

a decrease in short-run aggregate supply

What would remove a contractionary gap?

an increase in short-run aggregate supply

Which types of unemployment can exist in an economy that is at its potential output level?

frictional, seasonal, and structural unemployment only

A contractionary gap is closed in the long run by a

rightward shift in the short-run aggregate supply curve

If the price level rises by 4 percent and the nominal wage rises 6 percent, the real wage

rises by 2 percent

The nominal wage represents

the dollar value of the goods and services a worker can purchase in exchange for work time