Exhibit 14A-2 Macro AD-AS Model Price Level CPI 130 120 110 100 90 0 9.0 9.6 LRAS SPAS AD L 10.0 10.6 11.0 L 11.5 Real GDP (trillions of dollars per year) In Exhibit 14A-2, the long-run aggregate supply curve represents: potential real GDP output for this economy. that the economy is experiencing zero inflation. that the economy is experiencing a recessionary gap. the level of real GDP where the unemployment rate is zero.

Exhibit 14A-2 Macro AD-AS Model Price Level CPI 130 120 110 100 90 0 9.0 9.6 LRAS SPAS AD L 10.0 10.6 11.0 L 11.5 Real GDP (trillions of dollars per year) In Exhibit 14A-2, the long-run aggregate supply curve represents: potential real GDP output for this economy. that the economy is experiencing zero inflation. that the economy is experiencing a recessionary gap. the level of real GDP where the unemployment rate is zero.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when $5 trillion of real output is produced. The economy is currently in equilibrium at point A. Price Level (average price) 260 240 220 200 180 160 140 120 100 0 1 A AS₁ 2 3 4 5 6 7 AD₁ Real Output (in trillions of dollars per year) 8 Tools EQ Instructions: In parts a, b, and d, enter your responses as a whole number. a. What is the equilibrium rate of output? $ trillion per year b. How far short of full employment is the equilibrium rate of output? $ trillion c. On the graph, illustrate a shift of aggregate demand that would change the equilibrium rate of output to $5 trillion. Instructions: Shift the aggregate demand curve (AD1) such that the equilibrium in the macro model is at $5 trillion. Then use the tool provided 'EQ' to label the new equilibrium. d. What is the price level at this full-employment equilibrium?
Price level Figure 10-7 LRAS SRAS₂ SRASO J H SRAS ADO Real GDP Refer to Figure 10-7. Starting from long-run equilibrium at point F, at which of the following points would short-run equilibrium occur following a drought in the Midwestern states? O al O b. F OC.G O d.H
With the passage of time, which of the following will help direct this economy in Figure 10-21 toward its potential long-run rate of output (e1 to E2)? Figure 10-21 Price Level ti LRAS E₂ SRAS, SRAS: AD₂ AD₁ Y, Y₁ Goods and Services (Real GDP) Output is initially less than long-run capacity O lower interest rates that will stimulate AD and lower resource prices that will increase SRAS O higher interest rates that will reduce aggregate demand and higher resource prices that will reduce SRAS lower interest rates and higher resource prices, both of which will stimulate aggregate demand O higher interest rates that will reduce SRAS and lower resource prices that will stimulate aggregate demand
Price level (CPT) 110 105 100 95 AS Ful employment, 50 151 Real GDP AD₁ (trillions of dollars per year) Suppose the economy in Exhibit 11-2 is in equilibrium at point E, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by: A increasing government tax revenue by approximately $33 billion. B decreasing government tax revenue by $100 billion. increasing government tax revenue by $100 billion. decreasing government tax revenue by $750 billion. decreasing government tax revenue by approximately $33 billion.
Figure 34-3 PRICE LEVEL a a a LRAS Y, Y₂ QUANTITY OF OUTPUT SRAS. SRAS. AD Refer to Figure 34-3. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a falling price level and a falling level of output, as the economy moves to point C. falling price level and a rising level of output, as the economy moves to point A. rising price level and a falling level of output, as the economy moves to point A. Orising price level and a rising level of output, as the economy moves to point C.
Figure 6 PRICE LEVEL LRAS Y, Y₂ QUANTITY OF OUTPUT SRAS; SRAS, AD 15. Refer to Figure 6. Starting from point A and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a a. falling price level and a falling level of output, as the economy moves to point C. b. rising price level and a falling level of output, as the economy moves to point B. c. falling price level and a rising level of output, as the economy moves to point B. d. rising price level and a rising level of output, as the economy moves to point C.
Question 4 Exhibit 14A-3 Macro AD-AS Model Price level CPI P3 P₂ P₁ LRAS SRAS Yp Y₁ AD Real GDP (billions of dollars per year) In Exhibit 14A-3, the level of real GDP represented by Yp: O is potential real GDP for this economy. O indicates that the economy is experiencing zero inflation. O indicates that the economy is experiencing a recessionary gap. O would be associated with considerable unemployment.
40 AD3 38 - AS 36 - AD 2 34 - 32- AD, 30 - 28 - 26 24 - 22 - 20 4 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 AD1 is billion b. The shortfall when the demand curve is at AD1 is billion Price Level (average price)
Price Level P4 P3 P2 P₁ 100 AS₁ 200 Real Output (billions of dollars per year) 300 AD1 400 AS2 AD₂ Figure 8.3 Aggregate Supply and Demand Macro equilibrium is established at which level of real output, given AD₁ and AS₂ in Figure 8.3?
Figure 16-1 Price level A) E to A. B) C to D. C) A to E. D) C to B. E) D to C. A Save LRAS D B E Real GDP Refer to Figure 16-1. Suppose the economy is in short-run equilibrium above potential GDP and no policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from U SRAS AD 3 AD₂ AD₁
The macroeconomy is depicted by the graph to the right 160- a. The current equilibrium price level and output level respectively are: 80 and $ 10 trillion. (Enter your responses as a whole numbers.) LRAS 140- b. The full employment level of GDP is SRAS O A. $10 trillion since the LRAS is defined at this point. 120- O B. unknown since no information was provided about the labor market. 100- O C. $10 trillion now but thereafter it depends on what the aggregate demand curve does. O D. $10 trillion now but it depends on the SRAS curve. 80- 60- AD 40- 10 12 14 16 18 20 Real GDP ($ trillions) Price level
Price level 110 105 100 96 1 AS Ful employment. AD₂ AD₁ 50 51 Real GDP (trillions of dollars per year) Suppose the economy in Exhibit 11-2 is in equilibrium at point E, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by: A increasing government tax revenue by approximately $33 billion. B decreasing government tax revenue by $100 billion. increasing government tax revenue by $100 billion. decreasing government tax revenue by $750 billion. decreasing government tax revenue by approximately $33 billion.