Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point W. The price level is Po. Now, suppose there is an exogenous fall in the price level to P₂. Which of the following statements describes the likely macroeconomic effects? OA. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the AD curve shifts from AD to AD¹, and equilibrium moves from point B to point D. OB. The AE curve shifts to AE2, a new equilibrium is established at point U, and the AD curve shifts from AD to AD¹, and equilibrium from point B to point D. OC. The AE curve shifts to AE2, a new equilibrium is established at point U, and the economy moves from point B to point C along AD. O D. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the economy moves from point B to point C along AD. Desired Aggregate Expenditure Price Level Y₁ W_ AE=Y AE₂ AEo AE₁ Yo Y₂ Real GDP Real GDP Q U Q Q

Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point W. The price level is Po. Now, suppose there is an exogenous fall in the price level to P₂. Which of the following statements describes the likely macroeconomic effects? OA. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the AD curve shifts from AD to AD¹, and equilibrium moves from point B to point D. OB. The AE curve shifts to AE2, a new equilibrium is established at point U, and the AD curve shifts from AD to AD¹, and equilibrium from point B to point D. OC. The AE curve shifts to AE2, a new equilibrium is established at point U, and the economy moves from point B to point C along AD. O D. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the economy moves from point B to point C along AD. Desired Aggregate Expenditure Price Level Y₁ W_ AE=Y AE₂ AEo AE₁ Yo Y₂ Real GDP Real GDP Q U Q Q

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use the Keynesian cross to predict the impact of the following on equilibrium income. Use dia- grams and explain your intuition. 1. An increase in government purchases. 2. An increase in taxes. 3. An equal increase in both government purchases and taxes.
During the current global pandemic, the governments of all major economies searched for policy responses to dampen the negative impacts to the economy. In general, governments are aiming to shift the AS curve to the right through large increases in government spending. increase potential GDP. O shift the AD curve to the right through large increases in government spending and tax transfers. Opush up the factor prices.
Below graph these are 5 questions. Where equilibrium will shift to A or to B if : There is a rise in public sector borrowing There is a rise in government government subsidies to the motor industry The government spends less on defence The basic rate of income tax is raised The VAT rate is cut from 20% to 15%.
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