12. Increase in the aggregate demand and long-run aggregate supply curves Consider the dynamic aggregate demand and aggregate supply diagram for a hypothetical economy. Between 2021 and 2022, the aggregate demand curve (AD) shifts from AD₁ to AD2, the short-run aggregate supply curve (SRAS) shifts from SRAS, to SRAS2, and the long-run aggregate supply curve (LRAS) shifts from LRAS, to LRAS2. PRICE LEVEL (CPI) LRAS, AD₁ LRAS₂ The inflation rate between 2021 and 2022 is SRAS, 6.6 REAL GDP (Trillions of dollars) 6.8 ▼ SRAS₂ AD₂ The growth rate of full-employment output between 2021 and 2022 is Which of the following best explains the economic developments from 2021 to 2022? O The economy operated at full-employment output in 2021, but the subsequent increase in aggregate demand was not enough to restore the economy to full-employment output, leading to a recessionary gap in 2022. OA strong increase in aggregate demand allowed the economy to grow out of a recessionary gap in 2021 to full employment in 2022. O The economy experienced cost-push inflation.

12. Increase in the aggregate demand and long-run aggregate supply curves Consider the dynamic aggregate demand and aggregate supply diagram for a hypothetical economy. Between 2021 and 2022, the aggregate demand curve (AD) shifts from AD₁ to AD2, the short-run aggregate supply curve (SRAS) shifts from SRAS, to SRAS2, and the long-run aggregate supply curve (LRAS) shifts from LRAS, to LRAS2. PRICE LEVEL (CPI) LRAS, AD₁ LRAS₂ The inflation rate between 2021 and 2022 is SRAS, 6.6 REAL GDP (Trillions of dollars) 6.8 ▼ SRAS₂ AD₂ The growth rate of full-employment output between 2021 and 2022 is Which of the following best explains the economic developments from 2021 to 2022? O The economy operated at full-employment output in 2021, but the subsequent increase in aggregate demand was not enough to restore the economy to full-employment output, leading to a recessionary gap in 2022. OA strong increase in aggregate demand allowed the economy to grow out of a recessionary gap in 2021 to full employment in 2022. O The economy experienced cost-push inflation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 7 The model of aggregate demand and aggregate supply Answer is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model. is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted. is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted. Question 8 When the price level falls the quantity of Answer consumption goods demanded rises, while the quantity of net exports demanded falls consumption goods demanded and the quantity of net exports demanded both rise. consumption goods demanded and the quantity of…
8. Which of the following explain why the Aggregate Demand curve is downward sloping? a) An increase in the price level decreases the purchasing power of money denominated wealth, which in turn causes a decline in on consumption spending. b) An increase in the price level decreases the purchasing power of money, which means that more money is needed to purchase goods. This causes buyers of investment and durable goods to require bigger loans to finance their purchases. This, in turn, causes an increase in the demand for loanable funds which leads to a higher interest rate. A higher interest rate will reduce the real purchases of investment and durable goods. c) An increase in the price level makes goods relatively more expensive to foreigners causing them to buy less which means that net exports will decline. d) All of the above. e) None of the above. 9. Which of the following explain why the Aggregate Supply curve is upward sloping?…
2) What is the difference between the long-run aggregate supply and the short-run aggregate supply curves? Draw graph.
Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and which direction? What happens to aggregate output and the price level in each case? a. The price level changes. b. Consumer confidence declines. c. The supply of resources increases. d. The wage rate increases.
Aggregate Supply, and a New Equilibrium How will each of the following likely change the aggregate supply curve? Drag and drop options on the right-hand side and submit. For keyboard navigation... SHOW MORE ✓ Increase in the labor force. Increase in capital. Increase in the cost of raw materials. 7/20 answered Decrease in costs created by regulations. Increase in unemployment. = E = = = The aggregate supply curve shifts to the right. The aggregate supply curve shifts to the right. The aggregate supply curve shifts to the right. The aggregate supply curve does not move but there is movement along the curve. The aggregate supply curve shifts to the left. The aggregate supply curve shifts to the left. The aggregate supply curve does not move but there is movement along the curve.
Aggregate Demand and Aggregate Supply (AD-AS) Model (Chapter 13) 5.1 Why does the short-run aggregate supply curve slope upward? 5.2 Explain why the long-run aggregate supply curve is vertical. Then, explain how each of the following events would affect the long-run aggregate supply curve. A lower price levels b. A decrease in the labor force A decrease in the quantity of capital goods d. Technological change a. с. 5.3. Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. Explain how the economy moves back to full employment.
6. Determinants of short-run aggregate supply The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS1 to AS2, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion. 175 AS₁ 150 AS₂ 125 100 4 75 50 25 50 100 150 200 PRICE LEVEL 200 0 0 250 QUANTITY OF OUTPUT 300 350 400 ? The following table lists several determinants of short-run aggregate supply. Inflation expectations Tax rates Technology Fill in the table by indicating the changes in the determinants necessary to increase short-run aggregate supply. Change Needed to Increase AS
Question: The attached picture shows the aggregate demand/aggregate supply situation in the U.S. What is the value of actual GDP? What is the value of the GDP deflator? Assume that people and businesses become pessimistic about the future of the economy; how will this affect the graph above in the short run? (i.e., which curve(s) will shift, and in which direction?) After the short-run event in part b, what will happen to actual GDP? What will happen to the price level? After the short-run event in part b, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion). What long-run adjustments will be made in this economy as a result of the short-run changes in part c? How will the curve(s) shift in response to these long-run adjustments? After the long-run adjustments in part e, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion).
Which of the following will increase the Aggregate Demand curve or shift it to the right? The government passes a big infrastructure improvement spending bill O Interest rates rise The raises personal income taxes The U.S. population experiences a significant contraction in population, decreasing the number of people working and consuming. Question 2 Which of the following will decrease the aggregate supply curve or shift it to the left? New international sanctions on Iranian oil raise the price of oil globally and oil is an input in production of many goods and services A 10 percent across the board reduction in personal income tax rates Business taxes fall A new networking technology increases productivity all over the economy
11. Recession True or False: The aggregate-demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods. True False
34) Unemployment would increase and prices would decrease if aggregate demand shifted left aggregate demand shifted right aggregate supply shifted left aggregate supply shifted right
8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the increase in government spending. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in government spending on infrastructure causes the price level to the price level people expected and the quantity of output to the natural level of output. The increase in government spending will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in…