16Use the following graph to answer the next question.Price LevelADo iAD₁ASAD₂AD2Yo Y₁Real GDPSuppose the economy is currently in equilibrium at output level Y2, but full-employment output is at level Y₁. If the government falls to enact fiscal policy and no other conditions change, the eventual price level will most likely be closesttoMultiple ChoiceОоPOP2-оP3

It is given that the economy is currently operating at output level Y2; but the full employment…

Answered: 16 Use the following graph to answer…

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 following graph shows aggregate demand and short-run aggregate supply. 1.) Use the line drawing tool to show the effect of an increase in taxes. Properly label this line. 2.) Use the point drawing tool to show the new equilibrium price level and real GDP. Label this point 'B'. Carefully follow the instructions above, and only draw the required objects. C Price level A 0 Real GDP (Y) SRASO ADO
Required information SB Assume that the present price level is P1.... Assume that the present price level is P1. LAS 18 Real GOP C LAS Real GOP LAS Rel OOP 区 Real GOP
The graph below shows, the aggregate demand and supply for the economy of Etrusca. a. Draw AD2 on the graph below assuming an increase of $60 in aggregate demand. Plot only the endpoints of the curve below b. What is the new level of equilibrium GDP? c. What is the new equilibrium price level? d. How much is the reduction in GDP due to the crowding out effect?
Equal increases in government purchases and in net taxes have equal but opposite effects on the level of real GDP demanded. a. True b. False
Consider an economy that is operating atthe full-employment level of real GDP.Assuming the MPC is 0.90, predict the effect onthe economy of a $50 billion increase in governmentspending balanced by a $50 billionincrease in taxes.
Instructions: Enter your answers as a whole number. B. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.75, how much does government purchases need to change to shift aggregate demand by the amount you found in parta? $ billion Suppose instead that the MPC is 0.6. C. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $1 Price Level 160 140 120 100 80 60 40 20 0 LRAS (240,90) AD₁ billion. Real GDP (billions of dollars) AS AD 80 160 240 320 400 480 560 640 720 800
The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. Real Output Demanded (Billions of dollars) 20 40 60 100 160 Price Level (Index number) 160 120 80 40 20 Real Output Supplied (Billions of dollars) (Billions of dollars) 170 160 140 100 Note: Line segments will automatically connect the points. 40 On the following graph, use the blue points (circle symbols) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange points (square symbols) to plot the short-run aggregate supply (SRAS) curve for the economy.
Suppose that the government reduces the lump-sum tax, and suppose that gov- ernment always has a balanced budget: G = T. Using a diagram, describe and explain the effects of this policy on aggregate output, consumption, employment (or hours worked), and the real wage (note: show the effects on a graph with the production possibilities frontier and indifference curves).
Use the following graph to answer the next question. Price Level AS3 AS₁ 0 Real Domestic Output, GDP Which of the following factors will shift AS₁ to AS2? AS₂ A) A decrease in business subsidies B) An increase in input prices OC) A decrease in business taxes D) An increase in real interest rates
Using the graph, illustrate the long-run impact of the increase in government spending by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions PRICE LEVEL 240 200 2 200 400 600 800 OUTPUT (Bions of dollars) AS 1000 1200 þ 2þ 2 In the long run, due to the increase in government spending, the price level natural level of output, and the unemployment rate ? the natural rate. the quantity of gotput
c. Given the original $20 billion level of exports, what would be net exports and the equilibrium GDP if imports were $10 billion greater at each level of GDP? Fill in the gray-shaded cells. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. (1) (2) (3) (4) (5) (6) Aggregate Expenditures, Private Closed Aggregate Expenditures, Open Economy, Billions Real Domestic Output (GDP = DI), Billions Exports, Billions Imports, Billions Net Exports, Billions Economy, Billions $350 $390 $20 $40 400 430 20 40 450 470 20 40 500 510 20 40 550 550 20 40 600 590 20 40 650 630 20 40 700 670 20 40 Net exports = $ billion Equilibrium GDP = $ billion d. What is the multiplier in this example?
An economy is currently in a short-run equilibrium at point a. Which fiscal policy action would MOST likely bring the economy back to full employment output? LRAS SRAS Aggregate Price Level (P) Aggregate Output (Q) increase in taxes decrease in interest rates increase in government spending O increase in transfer payments ADO 自 ˊˋ

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