Consider the figure to the right. What change in the position of the aggregate demand curve could generate deflation that is, a decrease in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Bank of Canada could generate such a change in the position of the aggregate demand (AD) curve? in aggregate demand. The Bank of A fall in the equilibrium price level could be caused by Canada could generate such a change in the position of the aggregate demand (AD) curve by the quantity of money placed into circulation. 1.) Using the line drawing tool, draw a new AD curve that shows the effects of decreasing the quantity of money in circulation. Label your line "AD2." 2.) Using the point drawing tool, indicate the economy's new long-run equilibrium price and level of real GDP. Label this point "E₂." Carefully follow the instructions above, and draw only the required objects. Price Level LRAS₁ E₁ Real GDP per Year ($ trillions) AD₁

Consider the figure to the right. What change in the position of the aggregate demand curve could generate deflation that is, a decrease in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Bank of Canada could generate such a change in the position of the aggregate demand (AD) curve? in aggregate demand. The Bank of A fall in the equilibrium price level could be caused by Canada could generate such a change in the position of the aggregate demand (AD) curve by the quantity of money placed into circulation. 1.) Using the line drawing tool, draw a new AD curve that shows the effects of decreasing the quantity of money in circulation. Label your line "AD2." 2.) Using the point drawing tool, indicate the economy's new long-run equilibrium price and level of real GDP. Label this point "E₂." Carefully follow the instructions above, and draw only the required objects. Price Level LRAS₁ E₁ Real GDP per Year ($ trillions) AD₁

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to A) decreases in both the price level and real GDP. B) an increase in real GDP and an increase in the price level. C) a decrease in the price level but does not change real GDP. D) an increase in the price level but does not change real GDP.
For each of the changes below provide a narrative explanation and a graphical explanation of how the change will impact the economy's equilibrium price level and equilibrium quantity of output produced a) The federal reserve significantly increases the interest rate it pays banks for holding excess reserves. b) The government increases the income tax rate of households by 3%
Question 7 Which of the following are true about real and nominal demand? There may be more than one answer. a) A rise in the demand for real balances (Ma/P) raises equilibrium prices in the short-run. b) A drop in the demand for nominal balances (Ma) reduces equilibrium prices in the long-run. c) A change in government purchases can affect aggregate demand in the long-run. d) A change in government purchases can affect aggregate demand in the short-run.
The stock market experienced massive growth following President Trump's election in 2016, surging nearly 38%. Explain how or if this specific event affected Aggregate Demand.
The figure to the right shows an economy in an initial long-run equilibrium at point A. a. Using the line drawing tool, show how, if at all, the equilibrium real GDP and the long-run equilibrium price level are affected by a reduction in the quantity of money in circulation. Properly label this line. Carefully follow the instructions above, and only draw the required objects. b. According to your graph, the equilibrium price level while the equilibrium real GDP Price Level LRAS₁ A RGDP1 Real GDP ($ trillions per year) AD₁
Some central banks like the Reserve Bank of New Zealand are more concerned about price fluctuation than output fluctuation while other central banks are more concerned about output fluctuation. Explain the impact of a supply shock on inflation and output of the economy under the alternative positions of different central banks. Use appropriate graphs.
From the list below, choose ONE answer that best describes what would occur INITIALLY in the following AD (aggregate demand) AS (aggregate supply)" situation(s). A large fall in interest rates stimulates capital spending 0 O U Shift to the right of the AS curve Move to the right (up) along the AS curve Shift to the right of the AD curve Shift to the left of the AS curve Move to the left (down) along the AS curve Move to the right (down) along the AD curve Shift to the left of the AD curve Move to the left (up) along the AD curve
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Within the classical form of the quantity theory, the demand for money is given by Md = kPY. Suppose income (Y) is given at 400 units, and the money supply (M) is fixed at 200 units. Suppose k drops from its initial value of 0.5 to 0.25. What is the initial price level? What is the new price level after the change in k? Explain the process that leads to the change in the aggregate price level.
If the economy begins at a short-run equilibrium below potential output, then there would be a- downward pressure on wages and prices and the short-run aggregate supply curve will eventually shift down/right b- downward pressure on wages and prices and the short-run aggregate supply curve will eventually shift up/left c- upward pressure on wages and prices and the short-run aggregate supply curve will eventually shift down/right d- upward pressure on wages and prices and the short-run aggregate supply curve will eventually shift up/left
=0. An economy is described by the following equations: AD: SRAS: Okun's law: Y = 4000 + 2(M/P) Y = ybar + 100(P-P) (Y-ybar)/ybar =-2(u-ubar). Assume ybar 6000 and ubar=0.05. = A) Suppose that the nominal money supply has long been at M = 4000 and is expected by the public to remain constant forever. The equilibrium value of P is The equilibrium value of P is, The equilibrium value of Y is, The equilibrium value of u is The equilibrium value of x is, (2 points each) B) A totally unexpected increase in in the money supply occurs, raising it from 4000 to 5250. [Part B is for extra credit] The short run equilibrium value of P is The short run equilibrium value of Pe is_ The short run equilibrium value of Y is The short run equilibrium value of u is. The value of unanticipated inflation, which is defined as (P-P)/P, is, The value of the slope of the short-run Phillips curve is (2 points each)
Suppose that the full employment level of nominal GDP rises in one year from $16.8 to $18.0 trillion. The long-run equilibrium price level, however, remains unchanged at 120. By how much (in real dollars) has the long-run aggregate supply curve shifted to the right from one year to the next? $ trillion. (Round your answer to two decimal places.)