A reasonable dynamic assumption for the IS-LM model is that Select one: a. the economy is always on both the IS and LM curves. b. the economy is always on the IS curve, but moves only slowly to the LM curve. O c. adjustment to the new IS-LM equilibrium is instantaneous after an LM shift, but not after an IS shift. d. the economy is always on the LM curve, but moves only slowly to the IS curve. e. the money market is quick to adjust, but the bond market adjusts more slowly.

A reasonable dynamic assumption for the IS-LM model is that Select one: a. the economy is always on both the IS and LM curves. b. the economy is always on the IS curve, but moves only slowly to the LM curve. O c. adjustment to the new IS-LM equilibrium is instantaneous after an LM shift, but not after an IS shift. d. the economy is always on the LM curve, but moves only slowly to the IS curve. e. the money market is quick to adjust, but the bond market adjusts more slowly.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Match each definition to the appropriate component of aggregate demand. Definition The sum of the expenditures of business firms on new plant, equipment, and software and of households on new homes The goods and services purchased by all levels of government The total amount spent by consumers on newly produced goods and services The difference between exports and imports ⒸNet exports O Government spending Consumer Expenditure Which of the following components represents the largest piece of aggregate demand? O Consumer expenditure O Investment spending O Which of the following components represents the smallest piece of aggregate demand? O Consumer expenditure O Government spending O Investment spending ONet exports Investment Spending Government Spending Net Exports O O O O
Why is the aggregate demand curve downsloping? Specify how your explanation differs from the explanation for the downsloping demand curve for a single product. What role does the multiplier play in shifts of the aggregate demand curve?
Aggregate demand is defined as O the relationship between the total quantity of goods and services demanded and the income level, all other determinants of spending unchanged. the relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged. the demand for goods and services generated by all sectors in the economy, holding price level constant. O the relationship between the total quantity of goods and services demanded and the supply of factors of production, all other determinants of production unchanged.
• Assuming that there is no government spending or trade, an economy's GDP is the sum of domestic consumption C and investment I, ie. Y = C+ 1 of • Assume that I is unaffected by GDP • Assume the consumption function is C = co + cY • In any equilibrium aggregate demand, AD must be equal to Y, GDP. Given this model, which of the following statements is correct? Select one or more: O a. The aggregate demand equation is given by AD = Co + CY + I %3D O b. C is equal to autonomous consumption. O c. if c is a number between 0 and 1, and I+Co >0 then the aggregate demand equation is a straight line that must intersect the 45 degree line at some point. O d. In a demand-driven economy the AD curve is a vertical line Oe. In a demand-driven economy demand is equal to supply in equilibrium Of. In a supply-driven economy demand is equal to supply in equilibrium g. In a demand-driven economy, supply creates its own demand Oh. If the economy above is a demand-driven economy, then the equilibrium…
Which of the following would cause the Aggregate Supply curve to move from AS to AS2 in the graph below? Price Level 150 140 130 120 110 100 90 80 70 60 0 5 10 15 Real GDP ($ billion) AS -AD-AS2 O A federal government increase in spending. O A general increase in energy and labor cost for businesses. O An increase in productivity. O A general decrease in labor cost for businesses. 20 25
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.
Use the following graph to answer the next question. Price Level P2 AS AD 2 Y₁ Y2 Real GDP AD₁ Y3 If aggregate demand curve shifts from AD2 to AD1, the effect on real GDP wilt be a decrease from Multiple Choice Y3 to Y4. Y3 to Y1. Y2 to Y1. O Y2 to Y4. @ 29 N #3 $ > MacBook Pro % &
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Question Completion Status: ↳ A Moving to another question will save this response. Question 29 If the government decided to go to war on Russia, how would that impact the aggregate model? O a. This would not impact the aggregate model at all. O b. This would increase the price level which would shift the aggregate demand curve downwards. O c. It might shift the aggregate demand curve upward or to the right, and maybe shift the LRAS to the left. O d. It would shift the LRAS to the right. A Moving to another question will save this response. 1 2 # 3 4
D Question 8 When the government lowers income taxes, consumption is O stimulated; rightward shift of O stimulated; movement down along O reduced; leftward shift of O reduced; movement up along Question 9 An increase in the price of a nonlabor input such as oil will cause a movement up the SRAS curve. a leftward shift in the SRAS curve. a rightward shift in the SRAS curve. no change regarding the SRAS curve. , causing a the AD curve.
With the passage of time, which of the following will help direct this economy in Figure 10-21 toward its potential long-run rate of output (e1 to E2)? Figure 10-21 Price Level ti LRAS E₂ SRAS, SRAS: AD₂ AD₁ Y, Y₁ Goods and Services (Real GDP) Output is initially less than long-run capacity O lower interest rates that will stimulate AD and lower resource prices that will increase SRAS O higher interest rates that will reduce aggregate demand and higher resource prices that will reduce SRAS lower interest rates and higher resource prices, both of which will stimulate aggregate demand O higher interest rates that will reduce SRAS and lower resource prices that will stimulate aggregate demand
A The old price level still remains unchanged. Which of the below graphs is the correct depiction of the change in the previous two questions? P P (b) (a) P AS AS1 ASASO P P YB YA (c) P Y P YC➡YD Y (d) P AD1 ADO ADO AD YF YE Y YG YH Y - B Which points (or what distance) demonstrate the disequilibrium between the expenditure and output on the graph you chose? C Now the markets suggest a new price level at which output will equal expenditure. Graph an AS/AD and in it show with an arrow how the real balances effect, the interest rate effect, and the foreign effect will adjust the price level to match expenditure to output. D Now on a separate graph show how the worker cost effect will drive firms to hire or fire workers so that their output matches the expenditure.