Figure: An Increase in Aggregate Demand Price level P₁ P₂ P₁ LRAS SRAS SRAS K AD₂ AD₁ Y₁ Yp Y₂ Real GDP Reference: Ref 12-10 (Figure: An Increase in Aggregate Demand) At the Y2 level of real GD a recessionary gap exists equal to the difference between Y2 and Yp. an inflationary gap exists equal to the difference between Y2 and Yp. an inflationary gap exists equal to the sum of Y₂ and Yp. the solution at Y₂ is a long-run equilibrium.

Figure: An Increase in Aggregate Demand Price level P₁ P₂ P₁ LRAS SRAS SRAS K AD₂ AD₁ Y₁ Yp Y₂ Real GDP Reference: Ref 12-10 (Figure: An Increase in Aggregate Demand) At the Y2 level of real GD a recessionary gap exists equal to the difference between Y2 and Yp. an inflationary gap exists equal to the difference between Y2 and Yp. an inflationary gap exists equal to the sum of Y₂ and Yp. the solution at Y₂ is a long-run equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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LAS 100 90 X 80 70 110 60 0 320 360 below full-employment; 40 above full-employment; 20 below full-employment; 20 above full-employment; 40 actual; 0 SAS 400 440 480 520 Real GDP (billions of 2007 dollars) Figure 10.3.1 AD Refer to Figure 10.3.1. The economy is at its short-run macroeconomic equilibrium. There is a difference between equilibrium real GDP and potential GDP of $ billion.
Price Level(average price) 40 38 36 34 32 AD 1 30 28 26 24 22 20 0 AD 2 2 4 AD 3 AS 6 8 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 AD2 is $ 7 billion b. Would this mean the economy is in a recession or expansion? Recession
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Is the equilibrium at full employment, inflation or recession? Price level Aggregate Demand Aggregate Potential GDP Supply 50 $700 $100 100 $600 $200 150 $450 $450 200 $300 $480 250 $220 $500 300 $150 $510 $510 350 $100 $512
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COURSE: MACROECONOMICS - IS-LM and/or MUNDELL FLEMING MODELS Refer to 2 different models (and/or conditions) under which an increase in the amount of money circulating in the economy has a NULL impact on GDP. Then, refer to 2 different models (and/or conditions) under which an increase in the amount of money circulating in the economy has a MAXIMUM impact on GDP. EXPLAIN very briefly the mechanism by which each model generates that NULL or MAXIMUM impact on GDP. Hint: 2 conditions under increase of M (money) and how impact null (zero) and maximum on GDP. Example, considering both fiscal or monetary policies or liquidity trap model. Please graph and explain on detail both cases.
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