According to the basic AS-AD model with a horizontal AS curve, high inflation and recession can occur in the short-run at the same time when there is: O b. an adverse supply shock with a decrease in aggregate demand. O C. a favorable supply shock with a decrease in aggregate demand. O d. a favorable supply shock without a change in aggregate demand. an adverse supply shock without a change in aggregate demand.

According to the basic AS-AD model with a horizontal AS curve, high inflation and recession can occur in the short-run at the same time when there is: O b. an adverse supply shock with a decrease in aggregate demand. O C. a favorable supply shock with a decrease in aggregate demand. O d. a favorable supply shock without a change in aggregate demand. an adverse supply shock without a change in aggregate demand.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to the graph to the right. The shift from AS, to AS, shown in the diagram is referred to as AS, AS, a(n) O A. decrease in unit costs. O B. negative aggregate supply shock. O. positive aggregate supply shock. OD. increase in unit costs. Real GDP Price Level
As shown in the diagram to the right, the short-run aggregate supply curve (AS) is upward-sloping. This positive slope is explained in part by the fact that O A. in the short-run, output prices are slower to adjust to increasing aggregate demand than are input prices. O B. input price increases cause firms to raise their prices. O C. in the short-run, input prices-particularly wage rates are slower to adjust to increasing aggregate demand than are output prices. O D. business owners are more intelligent than other resource owners. Price level, P Aggregate output (income), Y AS
Suppose āc = 0.75, ā; = 0.20, āg = 0.20, āea = 0.10, and ājim R+, ā equals 0.20. For any given and the economy O 0; is in its long-run equilibrium O 1.05; has experienced a positive aggregate demand shock O 0.45; has experienced a positive aggregate demand shock O -0.15; has experienced a negative aggregate demand shock O 0.05; has experienced a positive aggregate demand shock
Arrange these statements in sequence to explain why the short run aggregate supply (SR AS) curve slopes upward. Suppositions as a starting point Conclusion as to why the SR AS curve slopes upward Answer Bank At the macroeconomic level, the increase in aggregate demand (AD) corresponds to a shift in the firms' demand curve, whereas the firms'supply curve remains fixed. Since customers are demanding more of the firms'product, the firms' demand curves increase, which increases prices and output. The firms'willingness to supply more output at a higher price at a micro level shows a positive relationship, which is then also reflected at the macro level with an upward sloping SR AS curve.
How do fluctuations in aggregate demand and short-run aggregate supply bring fluctuations in real GDP around potential GDP? Starting from a full-employment equilibrium, a decrease in aggregate demand and creates gap. O A. increases real GDP above potential GDP; an inflationary OB. decreases real GDP below potential GDP; an inflationary OC. increases real GDP above potential; a recessionary O D. decreases real GDP below potential GDP; a recessionary _, short-run aggregate , and the economy returns to a full-employment In the long run, the money wage rate supply equilibrium. O A. rises; increases B. falls; decreases C. rises; decreases D. falls; increases
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In the AS/AD Model, a decrease in the financial friction will Select one: O a. Shift the aggregate demand curve to the right. Ob. O b. Shift the aggregate supply curve to the left. Shift the aggregate supply curve to the right. O c. O d. Shift the aggregate demand curve to the left.
How would I do c and d?
In the figure, as the price level increases the aggregate demand curve will Price level (GDP price index, 2012 = 100) A. not shift. O B. not shift, but the aggregate demand curve will change so that it is positively sloped. O C. shift from AD, to AD, O D. shift from AD, to AD, and then back to AD,. E. shift from AD, to AD3. AD2 AD3 AD1 Real GDP (trillions of 2012 dollars)
Exhibit 14A-2 Macro AD-AS Model Price Level CPI 130 120 110 100- - 8 90 0 9.0 9.6 LRAS SRAS 10.0 10.5 AD L 11.0 Real GDP (trillions of dollars per year) F 11.5 In Exhibit 14A-2, the long-run aggregate supply curve represents: potential real GDP output for this economy. that the economy is experiencing zero inflation. that the economy is experiencing a recessionary gap. the level of real GDP where the unemployment rate is zero.
A constant inflation rate is shown with aggregate demand shifting rightward O A. faster than the aggregate supply shifts leftward. B. at the same rate as the aggregate supply shifts rightward. C. faster than the aggregate supply shifts rightward. D. with no shifts in aggregate supply. O E. at the same rate as the aggregate supply shifts leftward.
Consider the basic AD/AS macro model in long-run equilibrium that experiences a positive AD shock. In the short run, the price level and output In the long run, the price level and output O a. Decreases; decreases; decreases further; decreases further. O b. Decreases; decreases; decreases further; returns to potential output. O c. Increases; increases; increases further; increases further. O d. Increases; decreases; increases further; returns to potential output. O e. Increases; increases; increases further; returns to potential output.