For each of the following, use an AD-AS diagram to show the short-run and long-run effects on output and inflation. Assume the economy starts in long-run equilibrium. Instructions: In all the diagrams below, click and drag the appropriate curve or curves to show the short-run changes on the left side and long-run changes (which must also include the short-run changes) on the right side. d. A sharp drop in oil prices (assume the change in oil prices is permanent and no policy actions are taken). Inflation rate Short-Run Effects LRAS Qutput Y SRAS ADO O Inflation rate Long-Run Effects LRAS Qutput Y SRAS AD

For each of the following, use an AD-AS diagram to show the short-run and long-run effects on output and inflation. Assume the economy starts in long-run equilibrium. Instructions: In all the diagrams below, click and drag the appropriate curve or curves to show the short-run changes on the left side and long-run changes (which must also include the short-run changes) on the right side. d. A sharp drop in oil prices (assume the change in oil prices is permanent and no policy actions are taken). Inflation rate Short-Run Effects LRAS Qutput Y SRAS ADO O Inflation rate Long-Run Effects LRAS Qutput Y SRAS AD

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and which direction? What happens to aggregate output and the price level in each case? a. The price level changes. b. Consumer confidence declines. c. The supply of resources increases. d. The wage rate increases.
Brent, the international oil marker, hit US$130 a barrel on 8th March 2022. The oil price is close to 90 per cent above their level at the same point in time last year. Suppose that the rise in oil price is permanent. It creates an inflation shock and, at the same time, reduces potential output. With the aid of AD-AS model, show the difference in the effects of the oil price increase on output and the inflation rate in the long run if the government does not engage in stabilization policy and if the government does engage in stabilization policy to keep the inflation level low. Please elaborate your answer verbally.
The economy is in a full-employment equilibrium in year 1. In year 2, the price level decreased and the level of output increased. The most likely cause of the new equilibrium is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An increase in aggregate supply b A decrease in aggregate supply с An increase in aggregate demand A decrease in aggregate demand
Which is the correct order once the AD or SRAS has shifted to start the inflation process? a. Prices increase in the shortage markets. b. Shortages develop in some markets. c. Prices throughout the economy rise.
Suppose the economy is in a situation of moderate unemployment, and then an exogenous increase of aggregate demand occurs. (Assume the aggregate demand schedule follows the pattern set out by the mainstream story.) Use short run aggregate supply and aggregate demand analysis to discuss in detail the effects of this demand change on the price level and real GDP in the short run. Explain how the situation could change in the long run after the happenings in the first part.
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Explain why a supply shocks is most of the time believed to be temporary? And does not result in government requiring to do any special policy to rectify the problem.
Which of the following statements will not parallel shift the aggregate supply curve? A. A reduction in business taxes. B. A reduction in the price of imported oil. C. An increase in labor productivity. D. A reduction in the general level of prices Please do fast ASAP fast
Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a temporary increase in oil price, then we would expect that in the short run, a. real GDP will rise and the price level might rise, fall, or stay the same. b. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the same. 20. Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a temporary increase in oil price. then we would expect that in the short run, real GDP will rise and the price level might rise, fall, or stay the same. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the…
Consider the Efficiency Wage story. Suppose we had several periods of 0 inflation. Then if we had a decrease in Aggregate Demand that caused a decrease in the Aggregate Price level, we would see which of the following in the short run? Select one of the following multiple choice answers and explain why you chose that answer. a. higher inflation and higher unemployment. b. lower inflation (which would be deflation given our premise) and higher unemployment. c. higher inflation and lower unemployment. d. lower inflation (which would be deflation given our premise) and lower unemployment. e. none of the above.
The figure to the right shows an economy in a short-run equilibrium at point A Using the three-point curved line drawing tool, illustrate cost-push inflation. Properly label this curve Note: Carefully follow the instructions above and only draw the required object. Which of the following is most likely to cause the cost shock that shifts the AS curve consistent with cost-push inflation? A. A surge in the price of crude oil. OB. A tax increase on households. OC. An increase in the size of government. OD. A flood of new immigrants. Price level, Pa AD₂ Yo Aggregate output (income), Y AS du
QUESTION 9 The graph below reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to? Price Level P₂ P₁ Y2 Yi AS' AS AD Real National Income a. an increase in economic growth b. an increase in input prices c. a decrease in the natural unemployment rate d. less inflationary pressures