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AP Macroeconomics 3.3 Short Run Aggregate Supply Sras Questions

Explain why SRAS slopes upward with sticky wages and prices, how costs and expectations shift the curve, and how movements change output and unemployment.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • explain the upward SRAS slope using sticky wages, labour contracts, menu costs and slow input-price adjustment
  • link movement along SRAS to short-run changes in the price level, output, employment and unemployment
  • distinguish a price-level movement along SRAS from a production-cost determinant shifting the curve
  • predict SRAS shifts from nominal wages, oil, imported raw materials or per-unit production costs
  • predict SRAS shifts from productivity, technology, physical capital or lower-cost energy

Covered syllabus points

MOD-2.C—a. Define (using graphs as appropriate) the short-run aggregate supply (SRAS) curve. b. Explain (using graphs as appropriate) the…MOD-2.D—Explain (using graphs as appropriate) how movement along the SRAS curve implies a relationship between the price level (and…

Question 1

[Maximum number: 1]

The economy of Northland is in short-run equilibrium with an actual unemployment rate of 7% and an actual inflation rate of 1\%. The natural unemployment rate in Northland is 5\%.

Assume instead the government takes none of the preceding policy actions. (Northland is still in short-run equilibrium; the actual unemployment rate is 7%, the actual inflation rate is 1%, and the natural unemployment rate is 5\%.) What will happen to each of the following in the long run?

The short-run aggregate supply curve. Explain.

Question 2

[Maximum number: 1]

A reduction in aggregate demand will necessarily cause an increase in unemployment in the short run when

A

nominal wages or prices are sticky downward

B

nominal wages and prices are flexible

C

the aggregate supply curve is vertical

D

the money supply grows at a constant rate

E

imports exceed exports

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