11. Study Questions and Problems #11 True or False: Demand-pull inflation results from a decrease in the aggregate supply curve, while the aggregate demand curve remains fixed. O True PRICE LEVEL O False Adjust the following graph to show demand-pull inflation. Demand-pull inflation results in REAL GDP Aggregate Supply Aggregate Demand Y price level, Aggregate Demand 0 Aggregate Supply real GDP, and employment.

11. Study Questions and Problems #11 True or False: Demand-pull inflation results from a decrease in the aggregate supply curve, while the aggregate demand curve remains fixed. O True PRICE LEVEL O False Adjust the following graph to show demand-pull inflation. Demand-pull inflation results in REAL GDP Aggregate Supply Aggregate Demand Y price level, Aggregate Demand 0 Aggregate Supply real GDP, and employment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An increase in taxes when the economy is above full employment OA. increases; falls B. increases; rises O C. does not change; does not change O D. decreases; falls aggregate demand and real GDP, and the price level
QUESTIONS Which of the following can create demand-pull inflation? O Excessive aggregate spending supply disruptions caused by global pandemics and regional wars O Sharply rising oil prices Higher labor costs Recessions and depressions
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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 ?
11. The short - run aggregate supply curve slopes upward. According to the sticky - wage theory of the short - run aggregate supply curve, if workers and firms expected prices to rise by 4 percent, but instead they rise by 2 percent, then a. employment falls and production rises. b. employment rises and production falls. c. both employment and production rise. d. both employment and production fall.
Exhibit 10-4 Aggregate supply and demand curves AS 150 125 Price level 100 (CPI) E, 75 50 AD2 25 AD 0 2 4 6 8 10 12 Real GDP (billions of dollars per year) The increase in the price level as the economy moves from E 1 to E 2 in Exhibit 10-4 represents: a. demand-pull inflation. b. demand-shock inflation. c. cost-push inflation. d. wage push inflation.
6. Aggregate demand, aggregate supply, and the Phillips curve In the year 2023, aggregate demand and aggregate supply in the fictional country of Bartak are represented by the curves AD2023 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2024. The first potential aggregate demand curve is given by the ADA curve, resulting in the outcome illustrated by point A. The second potential aggregate demand curve is given by the ADB curve, resulting in the outcome illustrated by point B. 108 107 AS 106 B 105 A 104 AD 2023 103 AD. 102 AD 101 100 2 4 6 8 10 12 14 16 OUTPUT (Trillions of dollars) Suppose the unemployment rate is 7% under one of these two outcomes and 5% under the other. Based on the previous graph, you would expect to be associated with the higher unemployment rate (7%). If aggregate demand is low in 2024, and the economy is at outcome A, the inflation rate between 2023 and 2024 is PRICE LEVEL
Choose the statement that about deflation that is incorrect. A. The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand. B. An economy experiences deflation when it has a persistently falling price level. OC. A one-time fall in the price level is not deflation. O D. During a period of deflation, the inflation rate is negative.
3. In Keynesian short run aggregate supply curve segment what happens to the price and income (GDP) if the aggregate demand curve shifts outward or inward and why
4. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups. a homeowner with a fixed-rate mortgage. a union worker with a fixed labor contract a company that has invested some of its endowment in a government bonds which pay a fixed rate of return. 5. Indicate how each of the following events would affect the aggregate demand AD curve: a short-run decrease in the price level an increase in consumer confidence on the price level and real GDP an increase in government purchases
9. Study Questions and Problems #9 Initially, the economy is operating at the natural unemployment rate of 5%, and the inflation rate is also 5%. People correctly anticipate that a tax cut will cause the inflation rate to rise to 7%. According to rational expectations, inflation and the unemployment rate 5% in the short run. In the long run, the unemployment rate will be 5%.
PRICE LEVEL a a" a" LRAS Y, Y₂ QUANTITY OF OUTPUT 8 a. rising price level and a falling level of output, as the economy moves to point A. b. falling price level and a falling level of output, as the economy moves to point C. c. falling price level and a rising level of output, as the economy moves to point A O d. rising price level and a rising level of output, as the economy moves to point C. SRAS, SRAS Refer to Figure 34-3. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a AD