4. Suppose the aggregate demand and supply schedules for a hypothetical economy are as shown below. Amount of real domestic output demanded, billions $ 200 400 600 800 1000 Price level (price index) 300 250 200 150 100 Amount real domestic output supplied, billions $800 800 600 400 200 of A, What will be the equilibrium price and output level in this hypothetical economy? B. Why won't the 150 index be the equilibrium price level? Why won't the 250 index be the equilibrium price level? C. Suppose demand increases by $400 billion at each price level. What will be the new equilibrium price and output levels? D. What factors might cause a change in aggregate demand?

4. Suppose the aggregate demand and supply schedules for a hypothetical economy are as shown below. Amount of real domestic output demanded, billions $ 200 400 600 800 1000 Price level (price index) 300 250 200 150 100 Amount real domestic output supplied, billions $800 800 600 400 200 of A, What will be the equilibrium price and output level in this hypothetical economy? B. Why won't the 150 index be the equilibrium price level? Why won't the 250 index be the equilibrium price level? C. Suppose demand increases by $400 billion at each price level. What will be the new equilibrium price and output levels? D. What factors might cause a change in aggregate demand?

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 aggregate supply curve shows the relationship between the price level and the: O potential GDP in the economy. O total quantity of output that suppliers collectively produce. total quantity of output that buyers collectively plan to purchase. equilibrium GDP in the economy.
Question 3 Price level LOND 2 AS AD₂ AD₁ Q₁ Q₂ Q3 Real domestic output Refer to the above diagram. If the equilibrium price level is P ₁, then: producers will supply output level Q₁. O the equilibrium output level is Q2. aggregate demand is AD2. the equilibrium output level is Q3.
Price Level Aggregate Demand Aggregate Supply 200 10,000 4,000 300 9,000 6,000 400 8,000 8,000 500 7,000 9,000 600 6,000 9,500 700 5,000 9,800 800 4,000 9,900 The table above shows the initial aggregate supply and demand data for a country. If input prices rise and AS shifts to the left by 2,000 units at each price level, what is the new equilibrium output level? 8,000 O 2,000 7,000 O 6,000
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4. What do we mean when we talk about the export base of a region? How does an increase in the export base affect total employment? How does this relate to the multiplier? What factors limit the size of the multiplier within cities?
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33. Refer to Figure 4. As the_____decreases, the amount of ____demanded by all sectors of the economy_____
If there is excess demand for goods and services in the economy at the current price level, then the: If there is excess demand for goods and services in the economy at the current price level, then the: A. price level will remain the same B. GDP will fall C. price level will increase D. price level will decrease
Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown in the following table: Amount of Real GDP Demanded $ 600 $ 700 $ 800 $ 900 $1000 Price Amount of Real GDP Supplied $500 $1200 $400 $1000 $300 $200 $100 $ 800 $ 600 $ 400 a. Use the above data to graph the aggregate supply and aggregate demand curves. b. What are the equilibrium price and equilibrium level of real GDP? C. When this economy reaches its equilibrium GDP in this example, is it also operating at potential GDP? Explain why or why not.
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6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky-wage theory asserts that output prices adjust more quickly to changes in the price level than wages do, in part because of long-term wage contracts. Suppose a firm signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price level of 100. If the actual price level turns out to be 90, the firm's output prices will , and the wages the firm pays its workers will remain fixed at the contracted level. The firm will respond to the unexpected decrease in the price level by v the quantity of output it supplies. If many firms face similarly rigid wage contracts, the unexpected decrease in the price level causes the quantity of output…
3. A fall in the price level shifts the aggregate supply curve upward and decreases the quantity of real GDP supplied. Answer: Reason: Page 2 of 5