5. The "interest rate effect" can be described as an increase in the price level that raises theinterest rate and chokes offA) government spending.B) government spending and unplanned investment.C) investment and consumption spending.D) net exports.6. The international trade effect states thatA) an increase in the price level will raise net exports.B) an increase in the price level will lower net exports.C) an increase in the price level will raise exports.D) an increase in the price level will lower imports.

6.A an increase in the price level will raise net exports

Answered: 5. The "interest rate effect" can be…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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12
In the graph you've just explored, by how much does the quantity of money demanded change if the interest rate rises from 5 percent to 6 percent? A. $9 trillion B. $1 trillion C. $10 trillion
5 Which of the following is not a reason for the increase in aggregate demand? a. Decrease in imports b. Increase in government expenditure c. Increase in consumption d. None of the options Clear my choice
29. What is the effect of an increase in investment spending on the overall price level in the income-expenditure model?
7. Supply-side effects Consider a fictional economy that is operating at its long-run equilibrium. The following graph shows the aggregate demand curve (AD) and short-run aggregate supply curve (SRAS) for the economy. The long-run aggregate supply curve (LRAS) is represented by a vertical line at $6 trillion. The economy is initially producing at potential output. Suppose that fiscal authorities decide to decrease marginal tax rates. Assume that this change in marginal tax rates is perceived as a long-term change. Shift the appropriate curves to illustrate the supply-side view of the fiscal policy effect on output and the price level. (? 120 LRAS SRAS 100 AD 80 SRAS LRAS 40 AD 20 2 4 6 8 10 12 QUANTITY OF OUTPUT (Trillions of dollars) PRICE LEVEL
4. Use of discretionary policy to stabilize the economy The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (SRAS), and long-run aggregate supply curve (LRAS) for the U.S. economy in February 2020. Suppose the government decides to intervene to bring the economy back to its potential output. In this case, the government would engage in policy. Depending on which curve is affected by the government policy, shift either the SRAS curve or the AD curve to reflect the change that would successfully restore potential output. 150 SRAS AD 130 110 SRAS AD 70 LRAS 50 20 22 24 26 28 30 OUTPUT (Trillions of dollars) PRICE LEVEL
5. Supply-side effects Consider a fictional economy that is operating at its long-run equilibrium. The following graph shows the aggregate demand (AD) curve and short-run aggregate supply (AS) curve for the economy. The long-run aggregate supply curve is represented by a vertical line at the potential GDP level of $6 trillion. The economy is initially producing at potential GDP. Suppose that fiscal authorities decide to decrease marginal tax rates. Assume that this change in marginal tax rates is perceived as a long-term change. Shift the appropriate curves to illustrate the supply-side view of the fiscal policy effect on output and the price level. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther 8 100 8 PRICE LEVEL 8 9 8 True Potential GDP O False AS AD 10 QUANTITY OF OUTPUT (Trillions of dollars) 12 True or False! Supply side…
6. Suppose real GDP in an economy equals its potential output of $2,000 billion, the multiplier is 2.5, investment is raised by $200 billion, and the increased investment does not affect the economy's potential. a. Show the short- and long-run effects of the change upon real GDP and the price level, using the graphical framework for the model of aggregate demand and aggregate supply. b. Would real GDP rise by the multiplier times the change in investment in the short run? In the long run? Explain.

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5. The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off A) government spending