Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define the short run and the long run by whether wages and other input prices can fully adjust. (Guide: “The short run and the long run”; Practice Q2)
- I can define the LRAS curve and full-employment output (Yf). (Guide: “Why the LRAS curve is vertical”)
- I can explain why unemployment equals the natural rate, not zero, at Yf. (Guide: “Why the LRAS curve is vertical”, paragraph “What full employment means”; Practice Q3)
- I can explain why the LRAS curve and the PPC both show maximum sustainable capacity. (Guide: “The LRAS curve and the PPC”; Practice Q4)
Skills
- I can draw a vertical LRAS curve at Yf with the axes labelled price level and real GDP. (Guide: Figure 1; Practice Q6(a))
- I can identify full-employment output from unemployment data and the natural rate, and calculate cyclical unemployment. (Guide: Worked example 2; Practice Q5)
- I can calculate profit per unit in the short run and the long run when the price level changes. (Guide: Worked example 1; Practice Q7(a)–(b))
Reasoning
- I can explain why full adjustment of wages and prices makes LRAS vertical, and why sticky wages make SRAS slope upward. (Guide: Worked example 1(d); Practice Q1, Q7(c))
- I can explain why there is no long-run trade-off between inflation and unemployment. (Guide: “No long-run trade-off”; Practice Q6(c))
- I can match points inside, on and beyond the sustainable capacity of the PPC to output below, at and above Yf. (Guide: Worked example 2; Practice Q4, Q5(d))
- I can tell an event that shifts only SRAS from one that also shifts LRAS. (Guide: “The LRAS curve and the PPC”, paragraph “What moves LRAS”; Practice Q7(d))
All ticked? Move on to the equilibrium in the AD–AS model study guide, or return to the course roadmap.