AB 204 STUDY Successful Learning / ab204study.com AB 204 STUDY Successful Learning / ab204study.com | Page 11

4) A number macroeconomic variables decline during recessions.
One of these variables is the GDP.
a) What other variables, besides real GDP, tend to decline during
recessions? Given the definition of real GDP and its components,
explain the declines in these economic variables which are to be
expected.
b) Empirical studies indicate that the long-run trend in real GDP
of the USA has an upward trend. How is this possible given business
cycles and macroeconomic fluctuations? What factors explain the
upward trend in spite of the cycles?
5) Assume there are short-run and long-run Macroeconomic
Equilibriums in the economy.
Refer to the AS and AD curves above to answer the following
questions.
What is the initial point of the long-run macroeconomic
equilibrium? What are the equilibrium values? What does the
appearance of the long-run aggregate-supply (LRAS) curve
indicate? How does it differ from AS?
What are the factors that can shift short-run aggregate supply curve
from AS1 to AS2? What does Point A represent in the graph? What
does point B represent? Is it the short-run or long-run
macroeconomic equilibrium? Explain.
Assume aggregate demand (AD) is held constant, in the long-run,
starting from point B, what will the economy likely experience? Will
it reach the long equilibrium?