Consider the figure to the right. If this country's government decides to increase its short-term spending, what happens to theshort-run equilibrium price level, and why? Is this an example of demand-pull or cost-push inflation? Explain.1.) Using the line drawing tool, draw either a new aggregate demand (AD) curve or a new short-run aggregate supply (AS)curve that shows the effects of temporary government spending increases. Properly label your line.2.) Using the point drawing tool, indicate the economy's new short-run equilibrium price and level of real GDP. Label this point'E₂.'Carefully follow the instructions above, and only draw the required objects.Price LevelLRAS₁Real GDP per Year (S trillions)AS₁AD₁

Demand pull inflation implies increase in price level due to rise in aggregate demand in an economy.…

equilibrium price level, and why? Is this an example of demand-pull or cost-push inflation? Explain. the line drawing tool, draw either a new aggregate demand (AD) curve or a new short-run aggregate supply (AS) t shows the effects of temporary government spending increases. Properly label your line. the point drawing tool, indicate the economy's new short-run equilibrium price and level of real GDP. Label this point follow the instructions above, and only draw the required objects. Price Level LRAS, AS, AD₁

equilibrium price level, and why? Is this an example of demand-pull or cost-push inflation? Explain. the line drawing tool, draw either a new aggregate demand (AD) curve or a new short-run aggregate supply (AS) t shows the effects of temporary government spending increases. Properly label your line. the point drawing tool, indicate the economy's new short-run equilibrium price and level of real GDP. Label this point follow the instructions above, and only draw the required objects. Price Level LRAS, AS, 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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The figure to the right shows an economy in a short-run equilibrium at point A Using the three-point curved line drawing tool, illustrate cost-push inflation. Properly label this curve Note: Carefully follow the instructions above and only draw the required object. Which of the following is most likely to cause the cost shock that shifts the AS curve consistent with cost-push inflation? A. A surge in the price of crude oil. OB. A tax increase on households. OC. An increase in the size of government. OD. A flood of new immigrants. Price level, Pa AD₂ Yo Aggregate output (income), Y AS du
QUESTION 9 The graph below reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to? Price Level P₂ P₁ Y2 Yi AS' AS AD Real National Income a. an increase in economic growth b. an increase in input prices c. a decrease in the natural unemployment rate d. less inflationary pressures
Suppose that the economy is depicted in the graph to the right. Using the line drawing tool, show demand-pull inflation by correctly shifting aggregate demand. Label the new line 'AD, Carefully follow the instructions above, and only draw the required objects. stion 5.1 here to search
Use a correctly labeled aggregate demand and aggregate supply graph to illustrate cost-push inflation. Given an example of what might cause cost-push inflation in the economy
1) What effects might each of the following have on aggregate demand/aggregate supply? In each case use a diagram to illustrate the effect, explain why shifts occurred, and state the impact of each event on the price levels, the unemployment rate, and real GDP. a. Congress passes into law a $1.5 billion cut in personal income taxes. b. Significant technological advances in the renewable energy sector decrease the price of all electricity by 50% c. Increases in consumer confidence lead to a positive demand shock.
If investment as a fraction of GDP rose substantially and then stayed at a high level, what would be the effect on aggregate supply over time? It will shift both the SRAS and LRAS right. It will shift the SRAS right, but not the LRAS. It will shift the LRAS to the left, but not the SRAS. It will shift both the SRAS and the LRAS left.
Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, a shift in neither curve, or shift in both curves. If a shift is caused, indicate which curve shifts, and in which direction it shifts. What happens to aggregate output and the price level in each case? 4. The wages rate decreases.
The downward-sloping aggregate demand curve indicates that, ceteris paribus: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. there is an inverse relationship between demand and the average level of prices. a b a greater quantity of real GDP will be demanded at higher price levels than at lower price levels. C d a decrease in the price level leads to an increase in the quantity demanded of real GDP. inflation and output are directly related.
Use AD and AS curves to explain the effects on the equilibrium price level and equilibrium level of output in the short run.(a) An expansionary fiscal policy with the economy operating near full capacity. (b) A contractionary monetary policy during a period of high unemployment and excess industrial capacity. (c) A strong hurricane destroys energy plants which cause energy prices to increase, assuming that the Fed attempts to keep interest rates constant by accommodating inflation. (d) The federal government pursues a contractionary fiscal policy while the Fed acts to keep output from falling.
Description At a point along the short-run aggregate supply curve that is to the right of the point where it crosses the long-run aggregate supply curve, what must be true of the unemployment rate relative to the long-run, full-employment rate of unemployment? Why?
In your own words, explain why aggregate demand is inversely related to the price level. Why does the explanation for the inverse relationship between price and quantity demanded for the aggregate demand curve differ from that of a demand curve for a specific good?
Figure 9-2 Price Level LRAS RGDP, RGDPR RGDP SRAS, SRAS AD Refer to Figure 9-2. Which of the following is indicated by a shift from SRASO) to SRAS 1? Question 23 options: cost-push inflation increasing SRAS demand-pull inflation increasing aggregate demand