1. Discuss what factors shift the LRAS curve to the right (what increases long run aggregate supply). 2. Explain the following shifts by using the LRAS-AD diagram : a) Increase in both equilibrium real GDP and price level. b) A decrease in equilibrium real GDP and an increase in price level.

1. Discuss what factors shift the LRAS curve to the right (what increases long run aggregate supply). 2. Explain the following shifts by using the LRAS-AD diagram : a) Increase in both equilibrium real GDP and price level. b) A decrease in equilibrium real GDP and an increase in 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 graph below shows the AD-AS diagram for Spain. All numbers are in billions. 1. What is the size of real GDP in the short-run equilibrium? answer "a". 2. What is the price level in the short-run equilibrium? answer "b". 3. What is the level of Potential GDP in Spain? answer "c".
Q2
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Some advocates have suggested that the United States should move to a universal health care plan paid for at the federal level, like Medicare, which would be funded out of general tax revenues. Such a plan, it is argued, would guarantee quality health care to all. Ignoring all the controversy surrounding such a plan, how would the introduction of universal health care paid for from tax revenues impact short-run aggregate supply? On long-run aggregate supply?
11. Complete the following sentence: In terms of the AD-AS model, a decrease in the interest rate leads to a(n) investment spending,a(n) demand and, eventually to a(n)_ in the price level. in in aggregate in aggregate spending, a(n) in total production and (or) a(n). (4 A Decrease; decrease; decrease; decrease; decrease B Increase; increase; increase; increase; increase C Increase; increase; decrease; decrease; decrease D Decrease; decrease; increase; increase; increase 12. A justification for government intervention in the economy arises from the fact that market systems usually produce outcomes, but they do not necessarily produce _outcomes. (- A Efficient; equitable B Equitable; efficient C Efficient; profitable D Profitable; equitable 13. When the govermment uses its overdraft facilities at the central bank, it, in the economy. This is called , the quantity of money financing. A Increases; deflationary B Decreases; inflationary C Decreases; deflationary Increases; inflationary
on Indicate whether the following factor will affect aggregate demand (AD) or aggregate supply (AS) and whether the effect would be an increase or a decrease. Then indicate what will happen to the price level and the level of Real GDP and what type of equilibrium will result assuming that the economy is initially in long-run equilibrium. a) A decrease in the nominal wage rate. b) A decrease in exports. c) A decrease in the exchange rate. d) The discovery of vast new oil field in AD no effect decrease + increase no effect AS increase no effect increase increase decrease decrease decrease Real GDP increase decrease increase increase Equilibrium recessionary gap ⇒ inflationary gap inflationary gap inflationary gap AP ? Q Fir
The Treasury notes that there are several ‘risks’ to its predictions. These include that “ The potential for an extended conflict in the Ukraine ... has increased the risk of supply disruptions, pushing up and increasing volatility in energy, agricultural and metals prices..... A prolonged conflict will increase the risks associated with the negative terms of trade and confidence shocks for these countries” Using the dynamic AD/AS model, illustrate and explain how an extended conflict in the Ukraine would impact on the Australian economy. Be sure to discuss the pathways by which this conflict may impact on the domestic Australian economy. Hint: Start from diagram representing the current position of the economy and then illustrate what happens, consistent with your argument, showing both short run and long run effects. The majority of the marks for this question depend on what you write.
q. Consider the following scenarios and briefly explain how each scenario would affect short-run aggregate supply (SAS), long-run aggregate supply (LAS) or aggregate demand (AD) in Canada. In some situations, more than one may be affected. 1. Canada produces larger number of university graduates who possess higher levels of education and skill. 2. Depletion of resources cause increase in the prices of key inputs in production. 3. Canada’s trading partners experience higher rates of economic growth. 4. Increase in oil prices raises the value of Canadian dollar.
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Assume that aggregate demand is unaffected by the gas tax holiday. After the economy has fully adjusted to the gas tax holiday, the long-run effect is (an increase, no change, a decrease) in aggregate output and (an increase, no change, a decrease) in the price level.