(Figure: AD-AS) Use Figure: AD-AS. Consider an economy that is producing an aggregate output of Y₁. The economy faces a(n). gap, which can be closed by fiscal policy. Aggregate price level SRAS ₁ AD2 Real GDP recessionary; contractionary inflationary; contractionary recessionary; expansionary inflationary; expansionary LRAS AD3 Y₂ Yp Y₁ AD₁

(Figure: AD-AS) Use Figure: AD-AS. Consider an economy that is producing an aggregate output of Y₁. The economy faces a(n). gap, which can be closed by fiscal policy. Aggregate price level SRAS ₁ AD2 Real GDP recessionary; contractionary inflationary; contractionary recessionary; expansionary inflationary; expansionary LRAS AD3 Y₂ Yp Y₁ 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 graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy 180 LRAS AS 160 140 120 100 80 60 40 AD 20 AD, 100 200 300 400 500 600 700 800 900 Real GDP (billions of dollars) Inctructions: Enter your answers as a whole number. Price Level
What takes place when the economy reaches potential GDP and the aggregate supply becomes vertical?. The potential GDP is vertical only the traditional AD-AS model. c, The potential GDP is vertical only in both the income-expenditure model and the traditional AD-AS model. The potential GDP is vertical only in the income-expenditure model.
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.
Homework: Chapter 09 PRICE LEVEL 140 135 130 125 120 115 110 105 100 0 Changes in a Self-Regulating Economy 1 AD2 SRAS AD₁ LRAS 6 2 3 4 5 REAL GDP (Trillions of dollars) 8 Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD; to AD₂. As a classical economist from Langoria, you explain that the shift in aggregate demand creates . You also explain that will be affected in the short run. You note that such a gap leads to an unemployment rate that is to ▼ As wages change, the explain that in the long run, the natural unemployment rate. This means that wages are certain until Real GDP equals Natural Real GDP. Finally, you curve shifts to the will be affected. MacBook Pro X A-Z A+
Which fiscal policy will increase aggregate supply? increasing tax rates on businesses O increasing tax rates on consumers instituting more regulations on businesses allocating more money for federal student loans
The graph below shows a 45°-line (Keynesian cross) diagram. The economy is currently in macroeconomic equilibrium at output level Yo. Suppose that investment increases. 1) Use the line tool to show a possible position for the new aggregate expenditures line. Label this line AE2. Note: if you are not prompted for a label, you have used the wrong drawing tool. 2) Use the point drawing tool to show the new equilibrium levels of GDP and expenditures.Label this point 'B'. Real aggregate expenditures, AE Real GDP, Y Y = AE AE0 Q
(Please attach a graph showing your work for each question) Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. Show the adjustment process of the economy from the short-run to the long-run. What is the effect on unemployment in short-run and long-run? Can policymakers do something to accommodate this shock? Would the outcome be different in this case? Suppose that the coronavirus pandemic (COVID 19) in 2020 has resulted in a leftward shift of the aggregate demand curve (it has also shifted the short-run aggregate supply to the left, butlet’s ignore this effect here for simplification). Use the aggregate-demand/aggregate-supply model to show the effects on output and the price level/inflation in both the short run and long run (assume that the short-run aggregate supply curve is upward…
Most economists reason that an economy adjusts to inflationary and recessionary gaps slowly because are fixed in the short run. Consumer preferences Тахes Wages Supplies of most of the inputs
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.
Figure: Policy Alternatives Panel (a) Price level P₁ P₂ P₁ LRAS SRAS, AD₁ Y₁ YpY₂ Real GDP SRAS₂ A) an inflationary gap. B) a recessionary gap. C) no gap. D) long-run equilibrium. m Yes Predictions On Styles Ty Price level Page 4 P₁ Droon P₂ Voice Panel (b) LRAS * SRAS₁ Y₁ Yp Y₂ 11. (Figure: Policy Alternatives) In Panel (a), suppose that the initial equilibrium is at real GDP level Y₁ and price level P₂. At real GDP level Y₁ there is: AD₁ Real GDP 19 AD₂ 100%
QUESTION 40 Figure: Inflationary and Recessionary Gaps Aggregate price level P3 P₂ P₁ Reference: Ref 15-4 Y₁ LRAS Y₂ AD₁ Y3 SRAS AD₂ AD3 Real GDP (Figure: Inflationary and Recessionary Gaps) A movement from AD 3 to AD 1 could be caused by: A. increased government purchases. B. higher tax rates. OC. All of the answers are correct. OD. increased government transfers.