(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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. Events that shift the Aggregate Demand curve includegovernment spending changestax changesall of theseconsumer income
Aggregate price LRAS level SRAS, AD2 AD AD Yp Y2 Real GDP Reference: Ref 13-9 (Figure: AD-AS) Consider an economy that is producing an output level of Y. This economy is in: a) an inflationary gap, which can be closed by expansionary fiscal policy. b) a recessionary gap, which can be closed by contractionary fiscal policy. c) an inflationary gap, which can be closed by contractionary fiscal policy. d) a recessionary gap, which can be closed by expansionary fiscal policy.
Look at Figure 2. Assume this aggregate demand diagram represents an economy with government, where: a = exogenous consumption b = the marginal propensity to consume t = the tax rate |= investment G = government spending Y = income Figure 2 Aggregate demand AD, AD. 45° Income What is the equation for the aggregate demand schedule ADo? Select one: O ADO = b+ a(1 - t)G +1+ Y O ADO = a + b(1 – 1)Y + 1+ G O ADO = a + b(1 - t) I+ Y+ G O ADO = b+ a(1 – 1)Y + /+ G Next page > ( Previous page PHILIPS
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5. Short-run shocks in the AD-AS model The following graph shows an economy that is initially in equilibrium. Then, a large decline in stock prices occurs, reducing the wealth of individuals. On the graph, show the economic impact of this event in the short-run aggregate demand and aggregate supply (AD–AS) model by shifting one or both curves. Show the movement of the AD and SRAS on a graph. This event is an example of a decrease in AD/increase in AD/ decrease in SRAS/ increase in SRAS. As a result, the price level declines/rises, and the equilibrium real GDP declines/rises.
Suppose the economy operates at potential output, if the amount that businesses plan to invest is greater than the amount that consumers plan to save, then The economy will experience inventory accumulation There will be an inflationary gap Equilibrium GDP will be less than aggregate investment There will be a recessionary gap O O O O
2. A tabular approach to Keynesian equilibrium The following table shows some information on a hypothetical economy. The table lists real GDP, consumption (C), investment (I), government spending (G), net exports (X-M), and aggregate expenditures (AE). In this problem, assume that investment, government spending, and net exports are independent of the economy's real GDP level. X- Unplanned Inventory Real GDP C I G M AE Investment Direction of Real GDP and Employment $500 $300 $80 $60 $85 -$25 $600 $ $80 $60 $85 $600 $0 $700 $450 $80 $60 $85 $25 $800 $80 $600 $80 $60 $85 $60 $750 $50 $85 $825 $75 Using the numbers provided in the table, enter the correct numbers in the empty cells. Then, using the dropdown selection menus in the right-most column, indicate whether output will tend to increase, decrease, or remain in equilibrium at each level of real GDP in the table. (Note: The table uses negative numbers to indicate an unplanned inventory investment depletion and positive numbers to…
Figure 16-6 Price level 104 100 LRAS, LRAS₂ SRAS, SRAS₂ AD₂ Refer to Figure 16-6. In the dynamic model of AD-AS in the figure above, if the economy is at 0 $10 11 11.3 Real GDP point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely O increase the money supply and decrease the interest rate. O increase taxes. ● increase government spending. O increase oil prices. Oraise interest rates.
4 Exhibit 11-2 Aggregate demand and supply model 110 Price level 105 (CPI) 100 95 E NE Full employment. AS AD₁ AD 5.0 5.1 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 0.9. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by increasing government spending by $_____ billion.
Economics 3. Suppose the economy is in a recessionary gap.( the economy is not self-regulating and consider upward sloping SRAS ) If government spending increases by $30,000 but private investment reduces by $25,000 at the same time, will increase in government purchase lead the economy to long run equilibrium in goods and service market? Why or why not? Explain with AD-AS graph.
. Fill-in-the-Blank: A falling demand for investment goods results in a (n) _________ in aggregate demand
Question 24 Information: LRAS SRASI SRAS2 P1 P2 P3 AD Question: Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience O a rising price level and a falling level of output. O a falling price level and a falling level of output. O a rising price level and a rising level of output. O a falling price level and a rising level of output.