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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question 2: In Figure 2, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation, and recession?
Start at full-employment (FE) equilibrium with flexible wages and worker misperception of price level changes in the short run. Suppose then that we have an increase in Aggregate Demand. First, think about the short-run effects on price level (P), output level (Q), wage level (W), employment (L), and unemployment (U)? In the long run, once workers realize that there was a change in the price level, they will change the supply curve of labor. When all subsequent wage and price adjustments take place, we will be in a new long-run equilibrium. From the original full-employment (FE) equilibrium to the final one, what is the net change in the price level (P), output level (Q), the nominal wage (W), employment (L), unemployment rate (U), and the real wage (W/P)? Group of answer choices a) An increase in P, no change in Q, no change in W, an increase in L, an increase in U and no change in W/P. b) An increase in P, a decrease in Q, a decrease in W, a decrease in L, an…
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1. Imagine an economy, where the SRAS in terms of inflation is given by II=5+Y, where Y is output. Imagine that the long run AS curve is given by Y=2. (25 marks) a) Give the equation of the AD curve (you can take liberties), if we assume that initially, the economy is at its long-run equilibrium. Justify. b) Imagine that your chosen AD curve's intercept goes up by one unit due to an expansionary monetary policy. What will be the new final equilibrium after this change? Justify. c) What will be the equilibrium after two periods of adjustment? Justify. d) Assume that before all the changes in the economy, in the initial, long-run equilibrium, the interest rate was 4 percent. Give an IS and an LM curve that are compatible with this initial equilibrium. Justify. e) What are the IS and LM curves going to be at the very end of the adjustment process, i.e., in the new long run equilibrium? Justify.
Using aggregate supply and aggregate demand analysis illustrate with the use of a graph the effect of cost-push inflation on the economy.
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
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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
“Members of Congress are interested in increasing the minimum wage from its current rate of $7.25 an hour to $15. What effect will this have on the unemployment rate for low-skilled workers? How is this likely to impact equilibrium output and the price level in the short run?"
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
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.
Need help with this. Thanks! I provided the possible answers also.