Homework Clinic
Social Science Clinic => Economics => Topic started by: cherise1989 on Jun 29, 2018
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How does real GDP change in the long run when autonomous expenditure increases? Does real GDP change by the same amount as the change in aggregate demand? Why or why not?
What will be an ideal response?
Question 2
Which of the following statements about positive economic analysis is false?
A) There is much more disagreement among economists over normative economic analysis than over positive economic analysis.
B) Positive analysis uses an economic model to estimate the costs and benefits of different course of actions.
C) Unlike normative economic analysis, positive economic analysis can be tested.
D) There is much more disagreement among economists over positive economic analysis than over normative economic analysis.
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Answer to Question 1
In the long run, an increase in aggregate expenditure has no effect on real GDP, that is, real GDP does not change. The change in real GDPzerois less than the change in aggregate demand. The change in real GDP is nil because, in the long run, the economy returns to its full-employment equilibrium. In the long run, an increase in aggregate expenditure raises the price level but has no effect on real GDP.
Answer to Question 2
D