文件济简介管理jungwonyeo第2学期.pdfVIP

Econ 001- Intro Econ Singapore Management University Jungwon Yeo Term 2, 2013/14 Answer Key to SG Problem Set 11 PART I: Review Questions 1.b 2. False (When there is a recession, self-correcting mechanism comes with rightward shift of AS curve. A rightward shift of AS curve leads to a decrease in the price level. Refer to 8 of Lecture 11) 3. True (When there is a recession, unemployment rate is higher than the natural rate of unemployment. This means that there are more workers than jobs. That is, the wage is too high. Hence, wage level will decrease eventually. For a recession, the self-correcting mechanism comes with rightward shift of AS curve. This rightward shift is caused by a decrease in the wage level) 4. e 5. b 6. b (if Y is above the long-run equilibrium Y (the economy currently producing Y in the graph), the economy’s 1 unemployment rate is below the natural rate of unemployment: there are more jobs than (natural number of unemployed) workers. This will create upward pressure on the (nominal) wage level. Also, the expected inflation rate is higher, which also adds to the upward pressure on the nominal wage level. Hence, the nominal wage level will rise (this will result in AS curve shifting the left (AS to AS ) as shown in the graph.) 0 1 P AS1 AS0 P1 P0 AD1 AD0 Y