Chapter 24: Q 26. (page 602)
What is potential GDP?
GDP is a gross domestic product.
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Suppose concerns about the size of the federal budget deficit led the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
Suppose, after five years of sluggish growth, the European Union's economy picks up speed. What would be the likely impact on the U.S. trade balance, GDP, and employment?
Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram onto a
sheet of paper and then add a foreign country as a third agent. Draw a rough sketch of the flows of imports, exports,
and the payments for each on your diagram.
In your view, is the economy currently operating in the Keynesian, intermediate or neoclassical portion of the economy’s aggregate supply curve?
Name some factors that could cause the SRAS curve to shift, and say whether they would shift SRAS to the right or to the left.
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