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 explain why an economy with an output gap moves back to full-employment output in the long run when the government takes no action. (Guide: “The idea: an economy off LRAS will not stay there”)
- I can explain why unemployment above the natural rate pushes nominal wages down, and unemployment below it pushes them up. (Guide: “Closing a recessionary gap”, “Closing an inflationary gap”; Practice Q1)
- I can explain that self-adjustment shifts SRAS, not AD or LRAS. (Guide: “Common misconceptions”; Practice Q1, Q4)
- I can explain that a shift of LRAS shows a change in full-employment output, and that a rightward shift is economic growth. (Guide: “Shifts of the LRAS curve”; Practice Q4, Q7(d))
Skills
- I can find the short-run and long-run equilibria from AD and SRAS schedules, and the size of the SRAS shift. (Guide: Worked examples 1 and 2; Practice Q5)
- I can calculate real wages before and after a change in the price level, and the nominal wage that restores the real wage. (Guide: Worked example 1(b)–(c); Practice Q7(a)–(b))
- I can draw an AD–AS graph showing a shock, the short-run equilibrium and the long-run return to LRAS. (Guide: Figures 1 and 2; Practice Q6)
Reasoning
- I can compare the long-run price level, real output and unemployment with their values before an AD shock. (Guide: “Summary” table; Practice Q2)
- I can explain why a temporary supply shock leaves the economy where it started in the long run. (Guide: “Supply shocks and self-adjustment”; Practice Q3, Q6(d))
- I can tell a temporary output gain from AD apart from lasting growth in capacity. (Guide: “Shifts of the LRAS curve”; Practice Q7(e))
All ticked? Move on to the fiscal policy study guide, or return to the course roadmap.