4. Draw the aggregate demand and aggregate supply graphs in a three-panel model: In the first graph, showaggregate demand on the graph and aggregate supply in the immediate short run. In the second graph,again show aggregate demand, but this time show aggregate supply in the short run. Finally, in the lastpanel, show aggregate demand and aggregate supply in the long-run. Be sure to label each axis and eachcurve in each graph. (Be careful not to leave this section too brief: to get a full score on it, you should writeno less than two paragraphs on this topic alone. The graphs you prepare should be referred to in the paperas exhibits.)

Exhibit 2: The short run states that in a certain period in the future , one input is fixed while…

Answered: 4. Draw the aggregate demand and…

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. Macroeconomic equilibrium and the ranges of the aggregate supply curve The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with Natural Real GDP of $11 trillion. ? The Simple Keynesian Model AD₁ 130 125 120 115 110 105 100 95 90 8.0 8.5 9.0 11.5 12.0 9.5 10.0 10.5 11.0 REAL GDP (Trillions of dollars) Suppose consumers and businesses become less optimistic about future economic conditions, causing aggregate demand to decrease by a total $1.5 trillion at each price level (after all multiplier effects have taken place). On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD2). Be sure that AD2 is parallel to AD₁ (you can mouse over AD₁ to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. range of the aggregate supply curve, causing the equilibrium price The decrease in aggregate demand…
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6. Nonprice-level determinants of aggregate supply The lowing graph shows an increase in aggregate supply (AS) in a hypothetical economy. Specifically, aggregate supply shifts to the right from AS1 to S₂, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. PRICE LEVEL (CPI) 175 150 125 100 75 50 25 0 0 50 AS, 100 150 200 250 REAL GDP (Billions of dollars) 300 350 AS₂ 400 ©
change in real GDP arising from the $700 billion in payments. b. Illustrate the effect on real GDP with the use of a graph depicting the income-expenditure equilib- rium. Label the vertical axis "Planned aggregate spending, AEplanned" and the horizontal axis "Real GDP." Draw two planned aggregate expenditure curves (AEplanned1 and AEplanned2) and a 45-degree line to show the effect of the autonomous policy change on the equilibrium.
3. Why the aggregate demand curve slopes downward The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $500 billion, and the price level is 120. Moving up along the AD curve from point X to point Y, the quantity of output demanded falls to $300 billion, and the price level rises to 140. PRICE LEVEL 170 160 150 140 130 120 110 100 90 Y X AD (?
12. What are the three primary measures used in macroeconomics to assess the performance of an economy? 1) 2) work and actively seeking work. The opportunity cost of ( of goods and services that could have been produced if the unemployed workers would have worked. ) provides an overall indicator of output or production in the economy _) is the state a person is in if he or she cannot get a job despite willing to ) is the production _) tracks the overall increase in the level of prices in the economy. Each 3) ( measure is important for tracking the short-run and long-run health of the economy and for creating macroeconomic models to address important policy questions.
12. Market equilibrium and disequilibrium The following graph shows the monthly demand and supply curves in the market for teapots. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Teapots 60 54 Price (Dollars per teapot) 18 48 Supply Quantity Demanded (Теарots) Quantity Supplied Teapots) 1,000 420 42 36 30 24 Demand 18 12 6 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Teapots) The equilibrium price in this market is $ per teapot, and the equilibrium quantity is teapots bought and sold per month. Complete the following table by indicating at each price whether there is a shortage or surplus in the market, the amount of that shortage or surplus, and whether this places upward or downward pressure on prices. Price Shortage or Surplus Amount…
1. This question asks you to do a comparative staties analysis in the market for rice. The following graph depicts the initial market equilibrium for rice. For each seenario, determine (i) whether demand or supply is affected, (i) in which direction the curve(s) shift, and (iii) how the equilibrium changes. a. com (a substitute for rice) is now considered by doctors to be more healthy than rice b. scientists developed a new more productive technology for growing rice c. consumers' incomes rose and rice is a nommal good d. a hurricane destroyed a majority of rice crop e wages of agricultural workers rise
1. How does microeconomics relate to macroeconomics? 2. Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers. • The number of people at the most common ages for home-buying increases. • People gain confidence that the economy is growing and that their jobs are secure. • Banks that have made home loans find that a larger number of people than they expected are not repaying those loans. • Because of a threat of war, people become uncertain about their economic future. • The overall level of saving in the economy diminishes. • The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.
4. Consider the macroeconomic balance sheets of the following economies. As a policy analyst what would be your monetary and fiscal policy advice in both cases? Explain your answer. Country A Country B GDP Growth Rate: 7% GDP Growth Rate: 0.5% Inflation: 9% Inflation: 2.1% VIX Index (Equity Market Volatility Index): 99 VIX Index (Equity Market Volatility Index): 63 Unemployment: 5% Unemployment: 7% Exchange Rate Volatility: High Exchange Rate Volatility: Low Budget Deficit and Government Borrowing as a share of GDP: High Budget Deficit and Government Borrowing as a share of GDP: High Oil Exporter: Yes Oil Exporter: No
Consider the macroeconomics process/perspective. 1). Do you think it helps the economy to implement macroeconomic theories, ideas? Why? Why not? 2). Do you think that the macroeconomic theories and ideas are relevant to you? why? why not? 3). Do you think that macroeconomic ideas produce an economy that is more unequal across citizens? Why? Why not? 4). Do you think macroeconomic theories and ideas are too old fashioned for our current economy? Why? Why not?
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…

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