Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the graph, choose Not Shown. Description a b d Not Shown Aggregate demand (AD) Short-run aggregate supply (SRAS) when there is an inflationary gap Short-run aggregate supply (SRAS) when the economy is at long-run equilibrium Long-run aggregate supply (LRAS) Short-run aggregate supply (SRAS) when there is a recessionary gap ㅇ

Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the graph, choose Not Shown. Description a b d Not Shown Aggregate demand (AD) Short-run aggregate supply (SRAS) when there is an inflationary gap Short-run aggregate supply (SRAS) when the economy is at long-run equilibrium Long-run aggregate supply (LRAS) Short-run aggregate supply (SRAS) when there is a recessionary gap ㅇ

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter26: The Neoclassical Perspective

Section: Chapter Questions

Problem 21P: Use Table 26.3 to answer the following questions. Sketch an aggregate supply and aggregate demand...

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Use Table 26.3 to answer the following questions. Sketch an aggregate supply and aggregate demand diagram. What is the equilibrium output and price level? If aggregate demand shifts right, what is equilibrium output? If aggregate demand shifts left, what is equilibrium output? In this scenario, would you suggest using aggregate demand to alter the level of output or to control any inflationary increases in the price level?
4) Draw a graph that plots Short-run Aggregate Supply, Long.Run Aggregate Supply, and Aggregate Demand. Indicate the equilibrium point on the graph. Then, explain the shifts of the curves and the movement of equilibrium under the following events. 1. Government increases the income taxes 2. The war in Libya increases the price of oil globally
Note: Line segments will automatically connect the points. PRICE LEVEL (Billions of dollars) 200 160 120 0 80 160 240 REAL GDP (Index numbers) The equilibrium price level is 320 400 Initial AD The change in government spending the multiplier effect. SRAS New AD ✓, and the equilibrium level of real output is Suppose that the government spending increases by $16 billion and the expenditure multiplier in this economy is 5. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. the equilibrium level of real output by . The price level increase
4. Equilibrium The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. Real Output Demanded (Billions of dollars) 10 20 30 50 80 Price Level (Index number) 160 120 80 40 20 Real Output Supplied (Billions of dollars) 85 80 70 50 20 On the following graph, use the blue points (circle symbol) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange points (square symbol) to plot the aggregate supply (AS) curve for the economy.
130 120 SAS 110 A 100 AD 90 15.0 15.5 16.0 16.5 17.0 17.5 Real GDP (trillions of 2009 dollars) In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $15.0 trillion, then it must be the case tha aggregate supply has increased. aggregate supply has decreased. aggregate demand has increased. O aggregate demand has decreased Price level (GDP deflator, 2009-100)
5. Macroeconomic equilibrium and the ranges of the aggregate supply curve The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. PRICE LEVEL (CPI) 130 125 120 115 110 105 100 95 90 8.0 8.5 9.0 AD₁ AS 10.0 10.5 11.0 9.5 REAL GDP (Trillions of dollars) 11.5 12.0 A The decrease in aggregate demand leads to a movement along the to and the equilibrium level of real GDP to AD₂ Macro Eq 2 ? Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is GDP demanded at a price level of 105, and firms will experience an unplanned producing output until the economy reaches macroeconomic equilibrium at a price level of the real in inventories. Firms will respond to the change in inventories by and real GDP of Suppose consumers and businesses become less optimistic about future economic conditions, causing the…
2. Why the aggregate demand curve slopes downward The graph below shows the aggregate demand (AD) curve a hypothetical economy. At point X, the quantity of output demanded is $500 billion, and the price level is 120. Movin up along the AD curve from point X to point Y, the quantity output demanded falls to $300 billion, and the price level rises to 140. PRICE LEVEL 170 140 130 120 100 90 0 100 200 300 400 500 600 OUTPUT (Billions of dollars) exchange rate As the price level rises, the purchasing power of household real wealth will demanded to 800 effect. causing the quantity of output . This phenomenon is known as the Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dolla in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore and the number of foreign products purchased domestic consumers and firms (imports) will exports will therefore domestic output demanded to…
Price Level Aggregate Supply Aggregate Demand 90 3,000 3,500 95 3,000 3,000 100 3,000 2,500 105 3,000 2,200 110 3,000 2,100 Table 1. Sketch an aggregate supply and aggregate demand diagram. What is the equilibrium output and price level? If aggregate demand shifts right, what is equilibrium output? If aggregate demand shifts left, what is equilibrium output? In this scenario, would you suggest using aggregate demand to alter the level of output or to control any inflationary increases in the price level?