12. InflationThe economy begins in long-run equilibrium. Then one day, the president appoints a new chair of the Federal Reserve. This new chair is well known forher view that inflation is not a major problem for an economy.Note: You will not be graded on any changes you make to the following graph, but you may use it to help you understand the scenario described.LRASAggregate SupplyAggregate DemandAggregate SupplyLRASAggregate DemandQuantity of OutputWhich of the following statements accurately describes what would happen as a result of this news? Check all that apply.O People would expect the price level to rise.O The nominal wage that workers and firms agree to in their new labor contracts would be higher than it would be otherwise.O The profitability of producing goods and services at any given price level would increase.O The short-run aggregate-supply curve would shift to the left.If aggregate demand is held constant, the shift in the aggregate-supply curve will cause the price level toand the quantity of outputproduced toPrice Level

The economy begins in long -run equilibrium .The one day , the president appoints a new chair of the…

:. Inflation e economy begins in long-run equilibrium. Then one day, the president appoints a new chair of the Federal Reserve. This new chair is well known for r view that inflation is not a major problem for an economy. ote: You will not be graded on any changes you make to the following graph, but you may use it to help you understand the scenario described. LRAS Aggregate Supply Aggregate Demand Aggregate Supply LRAS Aggregate Demand Quantity of Output Price Level

:. Inflation e economy begins in long-run equilibrium. Then one day, the president appoints a new chair of the Federal Reserve. This new chair is well known for r view that inflation is not a major problem for an economy. ote: You will not be graded on any changes you make to the following graph, but you may use it to help you understand the scenario described. LRAS Aggregate Supply Aggregate Demand Aggregate Supply LRAS Aggregate Demand Quantity of Output Price Level

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The table below shows the initial aggregate demand, short-run, and long-run aggregate supply schedules - Price level Aggregate demand (billion $) Aggregate Supply (billion $) Long run Aggregate supply (billion $) 80 1600 400 800 90 1400 600 800 100 1200 800 800 110 1000 1000 800 120 800 1200 800 130 600 1400 800 140 400 1600 800 h. Is there positive or negative cyclical unemployment ? i. Do you have to Increase or decrease GDP? j. Should the country implement expansionary or contractionary policy?
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2. Explaining short-run economic fluctuations A majority of economists believe that in the long run, real economic variables and nominal economic variables behave independently of one another. For example, an increase in the money supply, a no long-run effect on the quantity of goods and services the economy can produce, a and nominal variables is known as variable, will cause the price level, a AL AXIS However, in the short run, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggregate supply (AS) diagram-it needs appropriate labels for the axes and curves. In the questions that follow you will identify some of the missing labels. AS variable, to increase but will have variable. The distinction between real variables ?
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1) Assume that the real wage in an economy is held above equilibrium. a. Graphically illustrate how an increase in demand for labor will change the number of unemployed workers. Be sure to label the axes and the quantities of labor hired before and after the increase in demand. b. Explain in words what happens to the number of unemployed as a result of this change. 2) In an economy, if 5 percent of the employed lose their job every month (s = 0.05) while 15 percent of the unemployed find a job every month (f = 0.15), what is the steady rate (equilibrium rate) of unemployment of the economy?
Question 32 Assume the economy is in short-run macro-equilibrium at E1. If the economy is allowed to self-correct on its own then: Price Level LRAS SRAS El P1 AD Real GDP Y1 Yp Da the aggregate demand curve shifts right, leading to demand-pull inflation and growth in the economy b) the short-run aggregate supply curve shifts left, leading to cost-push inflation and a decrease in real GDP Og the short-run aggregate supply curve shifts right, leading to deflation and an increase in real GDP O d) the aggregate demand curve shifts left, leading to deflation and a decrease in real GDP