Figure 16-1 Price level LRAS SRAS E AD, AD, AD, 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 D to C. O A to E. C to D. O C to B. O E to A.
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- Suppose Mexico, one of our largest trading partners and purchaser of a large quantity of our exports, goes into a recession. Use the AD/AS model to determine the likely impact on our equilibrium GDP and price level.Explain how to derive a total expenditures (TE) curve.Which of the following will NOT shift the ADTT curve? O a. A rise in consumer confidence O b. A rise in interest rates O c. A rise in government spending O d. A rise in exports
- Which of the following will NOT shift the ADT curve? O a. A rise in government spending O b. A rise in exports Ос. A rise in interest rates O d. A rise in consumer confidenceAssume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.Use the Keynesian cross to predict the impacton equilibrium GDP of the following. In eachcase, state the direction of the change and give aformula for the size of the impact.a. An increase in government purchasesb. An increase in taxesc. Equal-sized increases in both governmentpurchases and taxes
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