Economics

How can the long-run equilibrium level of real Gross Domestic Product

How can the long-run equilibrium level of real Gross Domestic Product (GDP) increase without the price level changing? What will be an ideal response?   ANSWER Since the long-run aggregate supply curve is vertical, the only way real Gross Domestic Product (GDP) can increase without the price level changing is if aggregate demand increases and […]

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Date: September 2nd, 2020

What are the three categories of correlation? Illustrate with real lif

What are the three categories of correlation? Illustrate with real life examples. What will be an ideal response?   ANSWER Correlation can be divided into three categories. These are: a) Positive correlation that implies that two variables tend to move in the same direction. For example, when income increases, consumption increases. b) Negative correlation that […]

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Date: September 2nd, 2020

The natural rate of unemployment is defined as the rate of unemploymen

The natural rate of unemployment is defined as the rate of unemployment that A) exists only during periods of recession or depression in the economy. B) exists due to welfare and unemployment benefits that reduce potential workers’ incentives to find work. C) prevails in long-run macroeconomic equilibrium, when all workers and employers have fully adjusted […]

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Date: September 2nd, 2020

Explain how an economy can experience long-run economic growth and def

Explain how an economy can experience long-run economic growth and deflation at the same time. What will be an ideal response?   ANSWER If aggregate demand remains relatively constant during the growth periods, than as the LRAS supply curve shifts right, the new equilibrium point of AD and the LRAS curve will be lower, indicating […]

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Date: September 2nd, 2020