2. Suppose incomes in Europe increase, causing an increase in demand for U.S.-produced goods and servicesthat are exported to Europe.(a) Describe and illustrate the short-run effects on the price level, real GDP, and employment.2(b) Assuming government does not intervene to fix the problem, describe and illustrate the impact onthe price level, real GDP, employment, and wages in the long-run.HINT: To answer this question, begin your answer with the graphs in your answer to part (a) (justduplicate your graples in the answer to (a)). Then add to these graphs the long-run effects.(e) Given the state of the economy in the short-run (answer to problem (a)), suggest a change intaxes to reverse the problem without waiting for convergence to long-run equilibrium. Illustratethe short-run impact of this policy on price level, real GDP, and employment. Compared to theoriginal long-run equilibrium, what happened to the price level and real GDP as a consequence ofyour government policy?IIINT: To answer this question, begin your answer with the graphs in your answer to part (a) (justduplicate your graphs in the answer to (a)). Then add to these graphs the long-run effects.

Answered: Image /qna-images/answer/ac9e1fda-24ae-45f2-bb01-fcffaba6b242.jpg

Answered: 2. Suppose incomes in Europe increase,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Are the following statements true, false, or uncertain? Explain briefly but clearly. * Suppose beekeepers earned twice as much on average in 2015 than they did in 1975, even after adjusting for inflation and even though the equipment and technology they use have not changed in any way whatsoever. Nonetheless, the rise in their wages was still likely caused by technological change, albeit through an effect on supply rather than demand. Suppose a new law made it easier for restaurant waiters in Chicago to form labor unions, and over the next three years wages rose at non-unionized restaurants in Chicago. Then the threat and/or product market effects were greater in magnitude than the spillover effect. Provide short, clear answers to the following questions The standard deviation of college graduates’ annual incomes has grown over time, but the standard deviation of their annual consumption spending has not changed much. How is this possible? What can you learn from the comparison…
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4) For each outcome below, tell what type of shift must have taken place in either the aggregate demand curve or the long-run aggregate supply curve. (a) In the short run, the price level is unchanged and output rises. (b) In the long run, the price level declines and output is unchanged. (c) In the long run, the price level rises and output decline.
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The following events have occurred in the history of the United States: A deep recession hits the world economy. The world oil price rises sharply. S. businesses expect future profits to fall. Explain the combined effects of these events on U.S. real GDP and the price level, starting froma position of long-run equilibrium.
Could you help me with my macroeconomics question? Thanks :)
Use the figure to answer the following questions. Assume that the economy initially is operating at price level 120 and real output level $870. This output level is the economy's potential (full-employment) level of output. Next, suppose that the price level rises from 120 to 130. 160 AS, AS, 150 AS, 140 130 120 110 100 90 810 830 850 870 890 910 930 950 Real output (dollars) Activate Wi Price level
The Greek letter a represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that a = $2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion. Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 110. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 10 20 ☐ 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 -0- AS LRAS (?) The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level…
Which of the following would cause the Aggregate Supply curve to move from AS to AS2 in the graph below? A) A general increase in energy and labor cost for businesses. B) A general decrease in labor cost for businesses. C) An increase in productivity. D) A federal government increase in spending.

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