5. The slope and position of the long-run aggregate supply curveSuppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which ofthe following? Check all that apply.PRICE LEVELSuppose the economy produces real GDP of $60 billion when unemployment is at its natural rate.132128124Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph.120116112108The inflation rate104The quantity of physical capitalThe size of the labor force100The price level01020 30 40 50 60OUTPUT (Billions of dollars)7080SNot affect the long-run aggregate supply curveO Shift the long-run aggregate supply curve to the leftShift the long-run aggregate supply curve to the rightc3LRASSuppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to, which will:?In the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve.Direction of LRAS Curve ShiftThe government allows more immigration of working-age adults who find work.For environmental and safety reasons, the government requires that the country's nuclearpower plants be permanently shut down.An investment tax credit increases the rate at which firms acquire machinery andequipment.

5. The slope and position of the long-run aggregate supply curve Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. PRICE LEVEL 132 Suppose the economy produces real GDP of $60 billion when unemployment is at its natural rate. 128 Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 124 120 116 112 108 The inflation rate 104 The quantity of physical capital 100 The size of the labor force The price level 010 60 70 80 20 30 40 50 OUTPUT (Billions of dollars) O Not affect the long-run aggregate supply curve Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to , which will: Shift the long-run aggregate supply curve to the left LRAS Shift the long-run aggregate supply curve to the right ?

5. The slope and position of the long-run aggregate supply curve Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. PRICE LEVEL 132 Suppose the economy produces real GDP of $60 billion when unemployment is at its natural rate. 128 Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 124 120 116 112 108 The inflation rate 104 The quantity of physical capital 100 The size of the labor force The price level 010 60 70 80 20 30 40 50 OUTPUT (Billions of dollars) O Not affect the long-run aggregate supply curve Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to , which will: Shift the long-run aggregate supply curve to the left LRAS Shift the long-run aggregate supply curve to the right ?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 3PA

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4. The slope and position of the long-run aggregate supp curve Assume the Federal Reserve triples the growth rate of the quantity of money in circulation. In the long run, this increa in money growth will affect which of the following? Check that apply. Suppose when unemployment is at its natural rate the economy produces a level of real GDP equal to $60 billion. E Using the purple points (diamond symbol) plot the economy long-run aggregate supply (LRAS) curve on the graph. 132 128 124 120 116 112 108 The inflation rate 104 The level of technological knowledge The quantity of physical capital The size of the labor force 100 0 + 10 20 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 LRAS Suppose now the government passes a law that significan increases the minimum wage. This change in policy will cause the natural rate of unemployment to, which will: Oshift the long-run aggregate supply curve to the right Not impact the long-run aggregate supply curve O Shift the long-run aggregate…
5. The slope and position of the long-run aggregate supply curve Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The inflation rate O The quantity of physical capital O The size of the labor force O The price level Suppose the economy produces real GDP of $30 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to piot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 112 108 104 100 10 20 30 40 50 60 70 80 OUTPUT (Billions of dollars) Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. The policy will cause the natural rate of unemployment to fall , which will: Shift the long-run aggregate supply curve to the left Shift the long-run aggregate supply curve to the right Not affect…
Suppose an economy is in long-run equilibrium. The centra bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply * Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O Nominal wages, prices, and perceptions adjust upward to this new price level. The government increases spending to increase aggregate demand. The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in th money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to nominal wages at…
9. Money Supply Suppose an economy is in long-run equilibrium. The central bank raises the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. RANDO LHAS Aggregale Supply * A Demand Quantity of Oulpul Now adjust the graph to show the new long-run equilibrium. Aggregate and - Aggregate Supply What causes the economy to move from its short-run equilibrium to its long-run equilibrium? The government increases taxes to curb aggregate demand. The government increases spending to increase aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. O Nominal wages, prices, and perceptions adjust upward to this new price level. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the increase in the money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to…
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force O The level of technological knowledge The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL
2. Why does the aggregate demand curve slope downward? The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL 140 150 140 130 120 110 100 90 8 BO 0 100 Aggregate Demand Aggregate Demand 600 200 300 400 500 REAL GDP (Billions of dollars) 700 800 ?
2. Why does the aggregate demand curve slope downward? The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL 160 150 140 130 120 110 100 90 80 Aggregate Demand Aggregate Demand 0 100 200 300 400 500 600 700 800 REAL GDP (Billions of dollars) Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply. A lower price level makes domestically produced goods less expensive than foreign goods. A higher price level decreases the real value of consumers' assets. A lower price level increases consumption through the income effect. As the aggregate price level rises, the cost of borrowing money will the quantity of output demanded to effect. causing This phenomenon is known as the
Exhibit: Shift in Aggregate Demand LRAS SRAS AD CAD AD In this graph, initially the económy is at point E, with price Po and output Y aggregate demand is given by curve ADo, and SRAS and LRAS represent, respectively. short-run and long-run aggregate supply. Now suppose the Fed decides to reduce the money supply. The economy moves first 4o point in the short-run and then, in the long-run, to point O B: C OCB A:D O D. A
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Refer to the table below. Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 Instructions: Enter your anwers as whole numbers. A). What is the equilibrium level of output? What is the equilibrium price level? B). Suppose that aggregate demand increases such that the amount of real output demanded rises by $ 7 billion at each price level. Insert the new values for real output demanded in the table below. Real Output Demanded, Billions New Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 What is the new equilibrium level of output? What is the new equilibrium price level? By what percentage will the price level increase? Will this inflation be demand-pull inflation or will it be cost-push inflation? C) If potential real GDP ( that is, full-employment GDP) is $ 510…
01 10 CO xp 381 In the figure, the economy is at an equilibrium with real GDP of $20 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts, because 0 0 0 0 0 A. aggregate demand; leftward; the money wage rate rises B. aggregate supply: rightward; the money wage rate falls OC. potential GDP; leftward; the money wage rate falls D. aggregate demand; rightward; the money wage rate falls OE. aggregate supply; leftward; the money wage rate rises 130- 120- 110- 100- Price level (GDP price Index, 2012 = 100) Potential GDP 90- AS AD 19.0 19.5 20.0 20.5 21.0 21.5 22.0 Real GDP (trillions of 2012 dollars) ✓ ✓ 5
Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. Price Level LRAS Aggregate Supply Aggregate Demand Quantity of Output Now adjust the graph to show the new long-run equilibrium. Aggregate Demand Aggregate Supply What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O The government increases taxes to curb aggregate demand. Nominal wages, prices, and perceptions adjust upward to this new price level. O The government increases spending to increase aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to…