8. Economic fluctuations IThe 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 governmentspending.AS160XAD200400600800OUTPUT (Billions of dollars)PRICE LEVEL24020040001000 12008 2 4 2?In the short run, the increase in government spending on infrastructure causes the price level tothe quantity of output tothe natural rate of unemployment in the short run.the price level people expected andthe natural level of output. The increase in government spending will cause the unemployment rate to 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 government spending on infrastructure.During the transition from the short run to the long run, price-level expectations willI curve will shift to theNow show the long-run impact of the increase in government spending by shifting both the aggregate demand (AD) curve and the short-runaggregate supply (AS) curve to the appropriate positions.PRICE LEVEL240200160120804000200400 600 800OUTPUT (Billions of dollars)ASAD1000 1200ADASIn the long run, as a result of the increase in government spending, the price level▼ the natural level of output, and the unemployment rateand the(?), the quantity of outputthe natural rate of unemployment.

Government expenditure is spent on public infrastructure such as health care, education, defense and…

8. Economic fluctuations 1 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. PRICE LEVEL 240 200 160 120 80 40 0 0 200 800 400 600 OUTPUT (Billions of dollars) AS AD 1000 1200 6 4 AD the natural rate of unemployment in the short run. AS (?) In the short run, the increase in government spending on infrastructure causes the price level to the quantity of output to the price level people expected and the natural level of output. The increase in government spending will cause the unemployment rate to

8. Economic fluctuations 1 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. PRICE LEVEL 240 200 160 120 80 40 0 0 200 800 400 600 OUTPUT (Billions of dollars) AS AD 1000 1200 6 4 AD the natural rate of unemployment in the short run. AS (?) In the short run, the increase in government spending on infrastructure causes the price level to the quantity of output to the price level people expected and the natural level of output. The increase in government spending will cause the unemployment rate to

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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…
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
15. Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result, A) the long-run aggregate supply curve will shift to the right. B) the long-run aggregate supply curve will shift to the left. C) the economy will move up along the long-run aggregate supply curve. D) the economy will move down along the long-run aggregate supply curve. 16. Which aggregate supply curve has a positive slope? A) long-run only B) short-run only C) both long-run and short-run D) neither long-run nor short-run
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 (?
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 a sudden and severe contraction in the housing market reduces the value of homes and causes consumers to spend less. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the housing market slump. (2) 240 AS 200 AD 140 AS 120 80 AD 40 200 400 800 1000 1200 OUTPUT (BIlons of dollars) In the short run, the decrease in consumption spending associated with the housing market contraction causes the price level to * the price level people expected and the quantity of output to v the natural level of output. The housing market slump 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…
7. Increase in the aggregate demand and long-run aggregate supply curves Consider the dynamic aggregate demand and aggregate supply diagram for a hypothetical economy. Between 2041 and 2042, the aggregate demand curve (AD) shifts from AD₁ to AD2, the short-run aggregate supply curve (SRAS) shifts from SRAS₁ to SRAS2, and the long-run aggregate supply curve (LRAS) shifts from LRAS₁ to LRAS₂. PRICE LEVEL (CPI) 100 96 LRAS₁ LRAS₂ AD1 SRAS 10.2 10.6 REAL GDP (Trillions of dollars) SRAS₂ AD2 ?
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170 Price 140 level 120 100 D AD5 AD4 AD 3 AD, AD2 3.0 4.0 5.0 6.0 7.0 8.0 Real GDP In Exhibit 20-8, if aggregate demand shifts from AD₁ to AD3, O a. real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. Ob. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120. Oc. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140. Od. real GDP will increase from $3.0 to $4.0, and the price level does not change.
3. In Keynesian short run aggregate supply curve segment what happens to the price and income (GDP) if the aggregate demand curve shifts outward or inward and why
✔ 2 Aplia Assignment Ch 20 4. Determinants of aggregate supply The following graph shows a decrease in short-ron aggregate supply (AS) in a hypothetical economy where the currency is the dollar Specifically, the short-un aggregate supply curve shifts to the left from AS, to AS, causing the quantity of output supplied at a price level of 100 to fall from $200 billion to $150 billion K 1 1 **### PRICE LEVEL 200 20 QUANTITY OF OUTPUT 380 400 The following table lists several determinants of short-run aggregate supply. Regulations on the firm Tax rates Input prices Complete the table by selecting the changes in each scenario necessary to decrease short-run aggregate supply Change Necessary to Decrease AS Grade It Now Save & Continue Continue without saving
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