Full employment output is 100. We have AD = 200 -2P where P is the price level. Suppose that a demand shocklowers the AD curve to 180 - 2P. Since the price is fixed, the quantity of produced in the short run immediately after thenegative AD shock is (40, 50, 80, 100), but the price in the long run is (40, 50, 80, 100)

The objective of the question is to determine the quantity produced in the short run immediately…

Answered: Full employment output is 100. We have…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a closed economy, where wages are sticky in the short run. The consumption function is C = co+c₁(Y-T), where the marginal propensity to consume c₁ is equal to 0.8. Initially the economy is in equilibrium at Y = Y* and P = Pº, where Pe is the price level that was expected when agents agreed their fixed nominal wage contracts. The short-run aggregate supply curve (SRAS) is horizontal. Suddenly the government increases government spending G by $200. For the following questions, if you think a variable goes up by (say) $50, just enter 50 as your answer. If you think a variable goes down by $50, enter -50 as your answer. If you think a variable doesn't change at all, enter 0 as your answer. 10. By how much will output Y change in the short run? 11. By how much will consumption C change in the short run? 12. By how much will investment I change in the short run? 13. By how much will output Y change (compared to its initial level before the change in G) in the long run, after wage…
Oil price shocks have an evident impact on the short run aggregrate supply curve. With the help of a graph demonstrate how rising oil prices effect the SRAS and explain what other factors can cause this shift.
Sample figure of AD curve has negative slope
Consider the graph at right. The economy is initially in short-run equilibrium at point D and worker wages adjust to the economic conditions. Move the cursor on the graph at night to the new short-run equilibrium point Price level, P P2 P1 PO AS(long run 4 hamma AS (short run) AS AD₁ AD YO Y1Y2 Aggregate output (income), Y
Suppose gold (G) and silver (S) are substitutes for each other because both serve as hedges against inflation. Suppose also that the supplies of both are fixed in the short run and \{(:Q_{C}=300)\} and that the demands for gold and silver are given by the following equations: P_{G}=960-Q_{G}+0.50P_{S} and P_{S}=600-Q_{S}+0.50P_{G} What the the equilibrium prices of gold and silver? The equilibrium price of gold is S and the equilibrium price of silver is S Please explain and show work.
Assuming a stable short-run supply curve, what will happen if there is a shift in aggregate demand? a) Profits and output increase in the long-run. b) Unemployment decreases in the long-run. c) Profits and output decrease in the short-run. d) Unemployment increases in the short-run. e) Unemployment and prices move in opposite directions in the short-run.
Suppose the full-employment level of real output (Q for a hypothetical economy is $250 and the price level (P) initially is 100. Use the short-run aggregate supply schedules below to answer the questions that follow. AS (P - 100) AS (P - 125) AS (P - 75) P Q P P 125 $ 280 125 $ 250 125 $ 310 100 250 100 220 100 280 75 220 75 190 75 250 Instructions: Enter your answers as a whole number. a. What is the level of real output in the short run if the price level unexpectedly rises from 100 to 125 because of an increase in aggregate demand? What happens if the price level unexpectedly falls from 100 to 75 because of a decrease in aggregate demand? b. What is the level of real output in the long run when the price level rises from 100 to 125? When the price level falls from 100 to 75?
The labor force participation rate fell during the pandemic. This would shift the LRAS curve right shift the SRAS curve up/left shift the SRAS curve down/right shift the LRAS curve left As prices rise while wages are sticky, firms' profit per unit rises. This is an explanation for why rising prices shift SRAS curve to the left the SRAS curve is upward sloping the AD curve is downward sloping rising prices shift SRAS curve to the right When the economy is at a short-run equilibrium above full employment, what is happening in the labor market? unemployment is high and there will be downward pressure on wages unemployment is low and there will be downward pressure on wages unemployment is high and there will be upward pressure on wages unemployment is low and there will be upward pressure on wages
Consider if in a given economy, the parliament approves an increase in minimum wage. Starting from the medium run equilibrium, when economy is at full employment to discuss the effects of this shock. a)- Using a set of WS/PS curves, and only in labor market, in step by step way, explain the impacts. b)- Using the aggregate supply and demand (AS/AD), and IS/LM curves, show the short and medium run equilibrium points. [No explanation, only neat and well-marked graphs are acceptable]
2.2. In macroeconomics, the immediate short run is known as a length of time when both input prices and output prices are fixed. In the short-run, input prices are fixed but output prices are variable. In the long run, input prices and output prices can vary. Describe the AS curve in the Immediate Short run. Describe the AS curve in the Short run. Describe the AS in the Long run.
At the point of full employment Select One: a) Production can be increased with a fall in prices b) Aggregate demand will no longer increase c) Production can be increased with increased prices only d) The producers get maximum profit e) Aggregate demand continues to fall
Q.1.17 A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the left.(c) shift the AS curve to the right.(d) leave both the AD curve and the AS curve unchanged.

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