Question: 11. Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the

11. Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output? (5 points)

Step by Step Solution

★★★★★

3.38 Rating (151 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Ans A decrease in aggregate demand in the longrun aggregate market results in an increase in the pri... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

1. State what happens to the price level if the dollar depreciates. 2. State what happens to Real GDP if the dollar depreciates. 3. State what happens to the price level if the dollar appreciates. 4....

In your government, appropriations for goods and services that remain encumbered at year-end are automatically carried forward to the next year. Thus, the budget for the following year must include...

Suppose there is a fall in the demand for shoes, which are provided by a competitive constant-cost industry. a. Does the price of shoes change by more in the short run or in the long run? b. Does the...

Suppose economists observe that an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion. a. If these economists ignore the possibility of...

The central bank is considering two alternative monetary policies: Holding the money supply constant and letting the interest rate adjust, or Adjusting the money supply to hold the interest rate...

Suppose economists observe that an increase in government spending of 10 billion raises the total demand for goods and services by 30 billion. a. If these economists ignore the possibility of...

Suppose that consumers decide to consume less (and therefore to save more) for any given amount of disposable income. Specifically, assume that consumer confidence (c0) falls. What will happen to...

The paradox of saving revisited You should be able to complete this question without doing any algebra, although you may find making a diagram helpful for part a. For this problem, you do not need to...

Using Figure 22.9 as your starting point, with a minimum wage of W2 in place, analyze how each of the following events will afect the demand and supply curves for unskilled labor, the number of...

If the short-run aggregate supply curve is horizontal, it is because (A) there exist many unemployed resources so that output can be increased without increasing wages and prices. (B) any increase in...

The project under consideration entails an ititial infrastructural invtment of rm million. and subsequent investments of the same amount every ve years. These aets will be depreciated on a...

A state fisheries commission wants to estimate the number of bass caught in a given lake during a season in order to restock the lake with the appropriate number of young fish. The commission could...

QUESTION 4 The following Trial Balance was extracted from the books of Mega Enterprise as at 31 December 2020. Particulars Debit (RM) Credit (RM) Capital 215,000 Duty on purchases 2,300 Insurance...

As the safety manager on a construction site, you have many roles. At the site, we are working we must approve the trenching and excavation plans for the subcontractors performing the work. Looking...

Write a C++ program that reads a single line of text from a file, then prints the contents of that line with the first and last characters swapped to an output file calledoutput.txt. The program...

Question 2 (1 point) A project requires the purchase of machinery for $40,000. The machinery belongs in a 20% CCA class and will have a salvage value of $4,000 at the end of the 4 year project. It...

An engineer is going to redesign an ejection seat for an airplane. The seat was designed for plots weighing between 150 band 201 ib. The new population of pilots has normally distributed weights with...

Refer to Example 9.15. Add the following functionality to this program: Allow the user to enter the cost of a gallon of gas on each trip and use a function, Cost() to calculate the cost of purchasing...

Samantha is flying from San Diego, California, to Arlington, Texas, on a commercial airliner. She asks for an aisle seat but only middle-of-the-row seats are left. Why arent any aisle seats left?

What is the difference between a price ceiling and a price floor? What effect is the same for both a price ceiling and a price floor?

It has been said that the decline in house prices precipitated the financial crisis of the first decade of the twenty-first century. How so?

The financial statements of adidas (DEU) and Puma (DEU) are presented in Appendices B and C, respectively. The complete annual reports, including the notes to the financial statements, are available...

In your audit of Garza Company, you find that a physical inventory on December 31, 2019, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items...

Esplanade SA was formed on December 1, 2018. The following information is available from Esplanade's inventory records for Product BAP. A physical inventory on March 31, 2015, shows 1,500 units on...