11. Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the proc- ess by which each of the following economic events will move the economy from one long-run macroeconomic equilibrium to another. Illustrate with diagrams. In each case, what are the short-run and long-run effects on the aggregate price level and aggregate output? a. There is a decrease in households' wealth due to a decline in the stock market. b. The government lowers taxes, leaving households with more disposable income, with no correspond- ing reduction in government purchases.

11. Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the proc- ess by which each of the following economic events will move the economy from one long-run macroeconomic equilibrium to another. Illustrate with diagrams. In each case, what are the short-run and long-run effects on the aggregate price level and aggregate output? a. There is a decrease in households' wealth due to a decline in the stock market. b. The government lowers taxes, leaving households with more disposable income, with no correspond- ing reduction in government purchases.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the United States is currently in a recession. a. Draw a correctly labelled graph of aggregate demand and aggregate supply showing each of the following in the United States: i. Output level ii. Price level A
3. Explain the determinants of the aggregate supply (AS) and describe how the AS curvewill shift when one of these determinants changes. 4. Using an AD-AS diagram, explain what happens if personal income taxes increase. 5. Explain what will happen to an AD-AS diagram, if there is a decrease in input prices.
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1. In the following table, determine how each event likely effects potential output (a.k.a., long-run aggregate supply). Direction of Potential Output Shift Event Left Right No Shift The government allows more immigration of working-age adults. For environmental and safety reasons, the government requires that the country’s nuclear power plants be permanently shut down. An investment tax credit increases the rate at which firms acquire machinery and equipment. 2. In the following table, determine how each event affects the position of the aggregate demand curve. Direction of AD Curve Shift Event Left Right No Shift A decrease in consumer confidence (suggests people believe a contraction/recession coming) A decrease in individual income tax rates An increase in the value/price of housing 3. What effect would an increase in aggregate demand…
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