39) Suppose the economy is in long-run equilibrium. In a short span of time, there is a largeemigration of skilled workers, a major depletion of oil fields, and a major new regulationlimiting electricity production. In the short run, we would expectthe price level and real GDP both to stay thesamethe price level to fall and real GDP to risethe price level and real GDP both to risethe price level and real GDP to fall

There is a large emigration of skilled workers, and a major depletion of oil fields, the electricity…

Answered: 39) Suppose the economy is in long-run…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. Which of the following is not correct? * The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. The consumer price index is used by economists to measure the inflation rate. The consumer price index is used to monitor changes in the cost of living over time The consumer price index is used to measure the quantity of goods and services that the economy is producing.
2) Use the table above to answer the following questions.a) What is the value of real GDP and price level at the long run macroeconomic equilibrium?b) What is the value of real GDP and price level at the short run macroeconomic equilibrium?c) Is the short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium?d) How will this economy return to its long run equilibrium? Explain using self-correctingmechanism.
2. Over the past few years, one of the most closely monitored economic variables has been the inflation rate, which measures the change in the price level. Measuring it is complicated because different prices change by different amounts and sometimes in different directions (for example, the price of college tuition has been steadily rising for decades, whereas the price of TV sets has been decreasing). We can use the expenditure function to aggregate the change in the price level, by asking how much more it costs to achieve the same utility level under the new prices. That is, if the prices change from (P₁, P₂) to (P₁, P₂), where p₁ > p₁ and pź > P₂, we can define the inflation rate as: b. i 1 1 Suppose Bebel has a Cobb-Douglas utility, U = 9₁²9₂², and an income level of Y = 1600. Suppose p₁ = 100 and p = 100 so the price of good 1 doesn't change, but the price of good 2 increases from p₂ = 16 to p2 = 25. a. Calculate Bebel's optimal consumption bundle and utility level at the initial…
3
Explain what would happen to AS or AD (choose AS or AD according to the case) in an economy in the cases below. In your explanation discuss whether AS or AD shifts to the left or right and the conse prices and quantities produced. A. Reduction of taxes B. Discovery of a new technology. C. Increases in unemployment. D. Increases in money supply. (3
Explanation it correctly
P1
2
6. Suppose political turmoil causes a significant decrease in oil production in the middle east. How will real GDP, employment, and the general price level be affected in the short run? 7. How will the event described in question 6 affect real GDP, employment, and the general price level in the long run? Explain in words and a graph.
13. The level of aggregate supply, in the long run, is not affected by A) changes in technology. B) changes in the capital stock. C) changes in the price level. D) changes in the number of workers. 14. The long-run aggregate supply curve will shift to the right if : A) the economy experiences technological change. B) there is a decrease in population. C) the economy experiences high levels of inflation. D) net exports decrease.
Question 13 (Mandatory) (1 point) Consider the nature of macroeconomic equilibrium. If, at a particular price level, aggregate output demanded is less than that supplied by producers, then O the price level will rise toward its equilibrium value. the aggregate supply curve will shift to the left, re-establishing an equilibrium. the price level will decline toward its equilibrium value. the aggregate demand curve will shift to the right, re-establishing an equilibrium. the aggregate supply curve will shift to the right, re-establishing an equilibrium.

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