For this problem, you will analyze the following component of GDP: ...O ...consumption [variant 1]...O ...investment [variant 2]...O ...net exports [variant 3]......measured in real terms.a) Describe in detail how inflation affects this component of GDP. What is the nameof the effect through which this component is affected by inflation?b) The aggregate-demand curve shifted to the left. Suggest two possible eventsrelated to this GDP component that could have contributed to this shift.c) Suggest a policy the government can introduce or eliminate to stimulate aggregatedemand through this GDP component.d) On the graph below [excluded]:Label the axes.●Graph the aggregate-demand curve, the long-run aggregate-supply curve,and the short-run aggregate-supply curve. Make sure you label them.Graph the shift of the aggregate-demand curve to the left and label the newcurve.Show what will happen if the government introduces the policy yousuggested in part (c). Assume the policy isn't enough to offset the decreasein aggregate demand.e) How will the economy reach the long-run equilibrium?f) On two new graphs, roughly sketch the fluctuations in the real GDP and the levelof prices [below will be two empty graphs: (i) vertical axis is real GDP, horizontalaxis is time; (ii) vertical axis is level of prices, horizontal axis is time].

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For this problem, you will analyze the following componen o ...consumption [variant 1]... o...investment O [variant 2]... ...net exports [variant 3]... ...measured in real terms. a) Describe in detail how inflation affects this component of GDP. What is the name of the effect through which this component is affected by inflation? b) The aggregate-demand curve shifted to the left. Suggest two possible events related to this GDP component that could have contributed to this shift. c) Suggest a policy the government can introduce or eliminate to stimulate aggregate demand through this GDP component.

For this problem, you will analyze the following componen o ...consumption [variant 1]... o...investment O [variant 2]... ...net exports [variant 3]... ...measured in real terms. a) Describe in detail how inflation affects this component of GDP. What is the name of the effect through which this component is affected by inflation? b) The aggregate-demand curve shifted to the left. Suggest two possible events related to this GDP component that could have contributed to this shift. c) Suggest a policy the government can introduce or eliminate to stimulate aggregate demand through this GDP component.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use the following figure to answer the next question. Price Level AS AD₂ AD₁ Y₁ Y₂ Real GDP Suppose the economy is currently at full employment with aggregate demand curve AD2. A further increase in consumption and investment spending will cause Multiple Choice Odemand-pull Inflation, and the new equilibrium output will be less than Y2. O cost-push inflation, and the new equilibrium output will be less than Y2. 0 O cost-push inflation, and the new equilibrium output will be more than Y2. demand-pull inflation, and the new equilibrium output will be more than Y2. MacBook Pro 66 27 & + ✓ 8 9 R T Y U ull 0 0 LL F G H J K
Dynamic aggregate demand (AD) can be derived using the quantity theory of money. Label the equation so that it accurately expresses the quantity theory of money in dynamic form growth in the money supply -+ Answer Bank unemployment growth in velocity inflation real economic growth marginal propensity to save Suppose that the velocity of money is stable, 4% real economic growth is occurring, the rate of inflation is 4%, unemployment is 5.3%, and the marginal propensity to save is 3%. By how much is the money supply growing? Enter your answer as a percentage.
12. Increase in the aggregate demand and long-run aggregate supply curves Consider the dynamic aggregate demand and aggregate supply diagram for a hypothetical economy. Between 2021 and 2022, the aggregate demand curve (AD) shifts from AD₁ to AD2, the short-run aggregate supply curve (SRAS) shifts from SRAS, to SRAS2, and the long-run aggregate supply curve (LRAS) shifts from LRAS, to LRAS2. PRICE LEVEL (CPI) 110 106 LRAS, AD₁ LRAS The inflation rate between 2021 and 2022 is SRAS, 6.6 REAL GDP (Trillions of dollars) 6.8 SRAS2 AD₂2 The growth rate of full-employment output between 2021 and 2022 is (?) Which of the following best explains the economic developments from 2021 to 2022? O The economy operated at full-employment output in 2021, but the subsequent increase in aggregate demand was not enough to restore the economy to full-employment output, leading to a recessionary gap in 2022. O A strong increase in aggregate demand allowed the economy to grow out of a recessionary gap in…
10. Which of the following are reasons why the short-run Aggregate Supply curve shown in the right-hand diagrams may be vertical? a) The economy at this level of real GDP would be operating beyond the full-employmetn level. b) Inflationary expectations have set-in so, the owners of resources are acting on these inflationary expectations and insisting on higher resource prices in anticipation of future products price inflation. c) Short-run Aggregate Suply in the Classical model is always constant. d) All the above e) Only (a) and (b) are true. f) None of the above.
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Consider the Keynesian sticky wage model. Assume that the economy is operating close to, but not at, its zero lower bound (ZLB). Discuss the following: 1. Could a negative shock to the IS curve make the ZLB bind? Explain and illustrate graph- ically. 2. Could a shock to current productivity z make the ZLB bind? What would need to be the sign of this shock to make the ZLB bind? 3. In the data, in most episodes where the ZLB binds (the US in the wake of the Great Recession, Japan during the 1990s, and the US during the Great Depression), output is low. Given this, would a supply shock as the reason for a binding ZLB make empirical sense? 4. Intuitively, explain why changes in government spending have a bigger effect on output at the ZLB than away from it.
question 2: In Figure 2, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation, and recession?
Suppose that government expenditures decrease by 12 from 20 to 8. Fill out column (3) of the Table. Find the new short-run equilibrium real GDP, inflation rate, and the growth rate of nominal wages.
please correct the statement if it false, or if it is true justify why its true. Thank you.....