6. Nonprice-level determinants of aggregate supplyThe following graph shows a decrease in aggregate supply (AS) in a hypothetical economy. Specifically, aggregate supply shifts to the left fromAS₁ to AS₂, causing the quantity of output supplied at a price level of 125 to fall from $250 billion to $150 billion.PRICE LEVEL (CPI)20017515010050250050AS2AS₁100150 200 250300REAL GDP (Billions of dollars)350 400 PRICE LEVEL (CPI125100TH100 1507550250050Determinant250 300 350 400The following table lists several determinants of aggregate supply. Complete the table by indicating the changes in the determinants necessary todecrease aggregate supply.Burdensome RegulationsResource PricesTax Rates200REAL GDP (Billions of dollars)Change Needed to Decrease AS

6. Nonprice-level determinants of aggregate supply The following graph shows a decrease in aggregate supply (AS) in a hypothetical economy. Specifically, aggregate supply shifts to the left from AS₁ to AS₂, causing the quantity of output supplied at a price level of 125 to fall from $250 billion to $150 billion. VEL (CPI) 200 175 150 125 AS₂ AS₁

6. Nonprice-level determinants of aggregate supply The following graph shows a decrease in aggregate supply (AS) in a hypothetical economy. Specifically, aggregate supply shifts to the left from AS₁ to AS₂, causing the quantity of output supplied at a price level of 125 to fall from $250 billion to $150 billion. VEL (CPI) 200 175 150 125 AS₂ AS₁

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

8. Suppose that aggregate demand and supply for a hypothetical economy are as shown: P Amount of real Price Amount rea AS GDP level GDP supplie demanded, billions (price index) billions 100 300 450 200 250 400 AD' 300 200 300 AD 400 150 200 500 100 100 Real 100 200 300 400 GDP Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Equilibrium price level = Is the equilibrium real output also necessarily the full-capacity real output? (Yes, No ) The full-capacity level of GDP is more lil cut at $ а. Equilibrium real output = $ billion billion. b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250? billion, (more, less ) than billion. The (shortage, surplus) of real output will drive the At a price level of 150, real GDP supplied is a maximum of $ the real GDP demanded of $ price level up. At a price level of 250,…
6. Determinants of short-run aggregate supply The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS1 to AS2, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion. 175 AS₁ 150 AS₂ 125 100 4 75 50 25 50 100 150 200 PRICE LEVEL 200 0 0 250 QUANTITY OF OUTPUT 300 350 400 ? The following table lists several determinants of short-run aggregate supply. Inflation expectations Tax rates Technology Fill in the table by indicating the changes in the determinants necessary to increase short-run aggregate supply. Change Needed to Increase AS
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…
2
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-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 90. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will v , and firms that rely on catalogs will respond by v the quantity of output they supply. If enough firms face high costs of adjusting prices, the unexpected…
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 ©
34) Unemployment would increase and prices would decrease if aggregate demand shifted left aggregate demand shifted right aggregate supply shifted left aggregate supply shifted right
8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the increase in government spending. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in government spending on infrastructure causes the price level to the price level people expected and the quantity of output to the natural level of output. The increase in government spending will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in…
illustrates and how it is related to the aggregate demand curve. 3. Figure 11.8 shows the aggregate expenditure curve when the price level is 110. When the price level rises to 120, the AE curve shifts vertically downwards from AE, by $1 trillion. When the price level falls to 100, the AE curve shifts vertically upwards from AE, by $1 trillion. Figure 11.8: FIGURE 11.8 Short Answer Problem 10 (a) 8 Price level (GDP deflator) Aggregate planned expendit (trillions o FIGURE 11.9 Short Answer Problem 10 (b) 130 a. Draw two new AE curves in figure 11.8 for the price levels of 100 and 120. What are the equilibrium levels of aggregate expenditures for these two price levels? Label as 'b' the equilibrium point when the price level is 100 and 'c' as price level is 120. 120 b. Use figure 11.8 to obtain three points 'a', 'b' and 'c' on the aggregate demand curve. Plot these three points on figure 11.9. Assume that the aggregate demand curve is linear and draw the AD curve on figure 11.9. Figure…
7. The long-run aggregate supply curve and short-run adjustments Suppose an economy's short-run aggregate supply curve (SRAS), current equilibrium aggregate price level (P₁), and real GDP (Q1) are shown on the graph that follows. The economy currently has Natural Real GDP (QN) of $6 trillion. Use this information to place the orange long-run aggregate supply curve (LRAS, square symbols) in the correct position on the graph. 20 PRICE LEVEL 0 2 4 6 Q₁ REAL GDP (Trillions of dollars) 8 SRAS 10 LRAS
9. Deriving aggregate demand from the income-expenditure model The following graph shows three planned expenditure lines for an economy at three different price levels. PE120 corresponds to the price level of 120; PE100 corresponds to the price level of 100; PE140 corresponds to the price level of 140. The black line (which starts in the bottom left corner) is a 45-degree line illustrating the set of points for which real income and planned expenditure are equal. 800 PE, (P = 100) 700 PE, (P =120) 600 PE, (P =140) Slope: 0.5 500 Y-Intercept: 200 400 300 100 100 200 300 400 500 600 700 800 REAL INCOME (Billions of dollars) The level of equilibrium output at a price level of 100, is On the following graph, plot the aggregate demand curve that results from varying the price level from 100 to 120 to 140, holding all else equal. Hint: Real income and the quantity of output are equivalent. For example, a real income of $100 billion is the same as a quantity of output of $100 billion. PLANNED…
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 (?