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.
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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
Price level (GDP priceindex) Real GDP demanded Real GDP supplied (trillions of 2005 yen) 75 600 400 105 450 550 135 300 700 The short-run macroeconomic equilibrium real GDP is ¥------ trillion and the equilibrium price level is ------. The size of the (recessionary , or inflamatory) gap is ¥-------- trillion.
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 $512
11. Suppose Ali calculates his permanent income by adaptive expectations. In year 2020 Ali's permanent income was 64,000, and in year 20021 his consumption is 48,000. Assume short-run marginal to consume is 0.164, and long-run marginal to consume is 0.82. What is his actual income in year 2021? • a Approximately 24,488 Approximately 33.472 Approximately 34,840 Approximately 36,683 Approximately 42.640 None of the above is correct
What is inflationary gap? Select one: When aggregate expenditures are greater than the full employment level causing a demand pull-inflation When aggregate expenditures are greater than full employment level causing cost push inflation None of the options are correct It is the gap between a developed nation GDP and an under-developed/ developing nation GDP When aggregate expenditures are inadequate to bring about a full employment level
If investment increases by 24 billion and the economy's MPC is 0 0.5, the aggregate demand curve will shift rightward by _____ billion dollars at each price level.
3. Suppose Ali calculates his permanent income by adaptive expectations. In year 2020 Ali's permanent income was 64,000, and in year 20021 his consumption is 46,000. Assume short-run marginal to consume is 0.164, and long-run marginal to consume is 0.82. What is his actual income in year 2021?
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$ Which of the following would cause the Aggregate Supply curve to move from AS to AS2 in the graph below? fs Price Level 150 140 130 120 110 100 90 80 70 60 % 5 0 16 5 O A general increase in energy and labor cost for businesses. O A federal government increase in spending. t 6 10 15 Real GDP ($ billion) -AS-AD-AS2 2 fa lyi & 7 7 J * 20 8 8 num lk ( 25 (1¹) 9
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