am completely stuck on these three questions. I have read my chapter, but I am still doubting that I got the answers correct.
1.A decrease in aggregate demand causes a decrease in ______ only in the short run, but causes a decrease in ______ in both the short run and the long run.
a)real GDP; the price level
b)the price level; the price level
c)real GDP; real GDP
d)the price level; real GDP
*I believe after reading that the answer is d*
2. Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result,
a)aggregate demand will increase by 3%
b)the purchasing power of wages will rise if wages increase by 3%
c)the short-run aggregate supply curve will shift to the left as wages increase
d)workers will be willing to take lower wages next year
*I believe the answer is c.
3) A decrease in aggregate demand results in a(n)______ in the _____.
a)recession; long run
b)recession; short run
c)expansion; short run
d)expansion; long run
I believe it may be b because there will be less money during a short time but I am unsure.
Thanks for your help
Let's go through each question and explain how to arrive at the correct answer.
1) A decrease in aggregate demand causes a decrease in ______ only in the short run, but causes a decrease in ______ in both the short run and the long run.
To answer this question correctly, we need to understand the effects of a decrease in aggregate demand on different variables in the short and long run. In the short run, a decrease in aggregate demand primarily affects the price level due to excess supply. However, in the long run, wages and resource prices can adjust, leading to a decrease in real GDP as well.
After analyzing the options, you believe the answer is d) the price level; real GDP. This answer is correct. A decrease in aggregate demand leads to a decrease in the price level in the short run, but it also affects real GDP in the long run.
2) Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result,
To answer this question, we need to consider the impact of price expectations on different elements of the economy.
Analyzing the options, you believe the answer is c) the short-run aggregate supply curve will shift to the left as wages increase. This answer is correct. When workers and firms expect higher future prices, firms will need to increase wages to match those expected prices. This increase in wages leads to higher production costs and, therefore, a leftward shift of the short-run aggregate supply curve.
3) A decrease in aggregate demand results in a(n)______ in the _____.
To answer this question, we need to understand the consequences of a decrease in aggregate demand.
Based on your analysis, you believe the answer is b) recession; short run. This answer is correct. A decrease in aggregate demand leads to a recession in the short run, where there is a decline in economic output, employment, and overall economic activity.
I hope this explanation helps you understand why each answer is correct. If you have further questions, feel free to ask!