Consider the economy represented by the aggregate supply-aggregate demandgraph below, which is initially at a short-run equilibrium at point A. Suppose taxesincrease. How would this affect the economy?Price level.(GDP deflator,2009 = 100)p1LRAS1GDP*AGDP1SRAS1Real GDP (trillions of 2009 dollars)Economic growth will decrease.Inflation will increase.Unemployment will decrease.Employment will increase.AD1

The correct answer is that economic growth will decrease as a result of the tax increase. To see the…

Answered: Consider the economy represented by the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the economy is initially in long-run equilibrium with the price level of 800. Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green). Price Level 1200+ 1100 1000 ADX 900- 800 AD 700- SRASI 600* 500 400 300 200 100 LRAS 200 300 400 500 600 700 800 900 Real GDP What is GDP in the new long-run equilibrium as a result of this shift? 100 1000 1100 120
The total expenditure in Macroland begins with these initial levels (in trillions of dollars): autonomous consumption=1, Investment = 2; Net Exports = 0, T=2, and MPC = 0.75. Assume that equilibrium has been achieved. Suddenly there is an external shock and as a result investment goes down to 1. What is the change in GDP? Use the base model to answer this question. Equilibrium GDP goes down by 1 Equilibrium GDP goes up by 1 Equilibrium GDP goes up by 4 Equilibrium GDP goes down by 4
Which of the following both shift the aggregate demand curve to the right? Group of answer choices net exports rise for some reason other than a price change and the money supply rises. net exports fall for some reason other than a price change and the money supply rises. net exports rise for some reason other than a price change and the price level rises. net exports fall for some reason other than a price change and the price level rises.
Potential real GDP is defined as: Group of answer choices The quantity of output that the economy can produce when it is above the natural rate of unemployment. The quantity of output that the economy can produce when it is at less than potential employment of its resources. The macro equilibrium The quantity of output that the economy can produce when it is at full employment of its labor and physical capital.
Identify how each of the following changes will affect Aggregate Demand An increase in consumers disposable income A decrease in Investment spending due to pessimistic forecasts concerning the future A global pandemic resulting in business closures and an increase in the unemployment level The federal government increases spending on roads, bridges, and school repairs The federal government reduces the federal income tax resulting in an increase in household disposable income
Country X's long run full employment level of Real GDP is estimated to be $22,900,000. However, the actual Real GDP equals to $17,900,000. Data also shows that in country X's Marginal Propensity to Consume (MPC) is calculated to be 91% (0.91). Answer the following questions. 1. Vite !!! II!. S V M Sie nou! Dunn? -ncit. CUICUI 12 Mure N IV. Explain what the income multiplier value you obtained in part III means. V. If Real GDP gap in the neighboring country Y is $5,550,000, with income multiplier 9.2, by how much should country Y's "Autonomous consumption" (i.e. spending) change to close the $5,550,000 gap?
Suppose AE = 0.50 Y + 500. If GDP = $1,000, and There will be excess supply, so inventory will accumulate and firms will reduce output next period. There will be excess demand, so inventory will shrink and firms will increase output next period. There will be neither excess demand nor excess supply, so Y = $1,000 is the equilibrium level of GDP.
LRAS, LRAS₂2 A. B. C. D. E. A B C E D LL AD₁ SRAS₁ W SRAS2 AD2 Real GDP (Y) Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D? The population has aged and there are fewer people in the labor force. Firms and workers expected the price level to rise. The economy experienced an increase in government spending. The economy was in an expansion and has adjusted. The country's overall productivity increased.
If Saving+Tax+Import > Investment+Government spending+Export, then _____ must fall to establish macroeconomic equilibrium. Group of answer choices net exports gross exports taxes real GDP government spending
Price Level(average price) 40 38 36 34 32 AD 1 30 28 26 24 22 20 0 AD 2 2 4 AD 3 AS 6 8 10 12 14 16 18 20 Real Output (quantity in billions per year) Suppose the economy is at full employment when AD = AD3. a. The GDP gap when the demand curve is at AD2 is $ 7 billion b. Would this mean the economy is in a recession or expansion? Recession
If the economy depicted in the graph below is self-correcting, then: LRAS Price SRAS Level C AD Real GDP SRAS will shift leftward and the economy will move to a new equilibrium at point B. AD will shift leftward and the economy will move to a new equilibrium at point C. SRAS will shift rightward and the economy will move to a new equilibrium at point C. AD will shift rightward and the economy will move to a new equilibrium at point B.
If membership falls in labor unions and unions become less popular, then: production costs will increase, SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level. production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level. production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level. production costs will fall, there will be a downward movement along SRAS, equilibrium GDP will increase and aggregate price level will fall.

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