n the AD-AS model, long-run equilibrium occurs when: output is above potential GDP. aggregate demand equals short-run aggregate supply. output is below potential GDP. aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run aggregate supply curve. unemployment equals zero.

Short-run macroeconomic equilibrium occurs when:Question 3Answera.structural and frictional unemployment equal zero.b.the equilibrium lies on the long-run aggregate supply curve.c.aggregate demand and short-run aggregate supply intersect.d.A and B

Which of the following best describes what happens when a country is in long-run equilibrium?A.AD intersects SRAS and LRAS at the same point.B.The unemployment rate equals zero percent.C.There is a positive output gap.D.There is a recessionary gap.

The economy is initially at its long-run equilibrium. A diplomatic dispute with its trading partner countries now leads to a decline in its exports. In the short run, the aggregate demand curve shifts left. In the long run, the price level decreases, the output returns to its potential, and real wages decrease. In the short run, the aggregate demand curve shifts right. In the long run, the price level increases, the output returns to its potential, and real wages do not change. In the short run, the aggregate demand curve shifts right. In the long run, the price level increases, the output returns to its potential, and real wages increase. In the short run, the aggregate demand curve shifts right. In the long run, the price level increases, the output returns to its potential, and real wages decrease. In the short run, the aggregate demand curve shifts left. In the long run, the price level decreases, the output returns to its potential, and real wages do not change.

According to the AD-AS (Aggregate Demand-Aggregate Supply) Model, which of the following statements is true?A.A) An increase in government spending will always result in higher inflation and output in the short run.B.A shift to the left of the short-run aggregate supply curve will lead to higher long-run economic growth.C.An increase in aggregate demand will only affect the price level in the long run, not in the short run.D.A decrease in the money supply will shift the aggregate demand curve to the right.

Consider an AD-AS model with AD curve 𝑌 − 𝑌 ∗ = −𝛼𝛾(𝜋 − 𝜋 ∗ ) + 𝜀" and AS curve𝜋 = 𝜋 # + 𝜙𝛽(𝑌 − 𝑌 ∗ ) + 𝜀$ with parameter values 𝛼 = 𝜙 = 0.5 and 𝛾 = 𝛽 = 2 andwith inflation target 𝜋 ∗ = 0.03 and potential output normalised to 𝑌 ∗ = 1. Startingfrom a long-run equilibrium with 𝜋 # = 𝜋 ∗ suppose there is a temporary supply shock𝜀$ = −0.06. Which of the following is TRUE?a. In the short run, inflation is 1%b. In the long run, inflation is 0%c. In the short run, output is 6% below potentiald. In the short run output is 3% above potential