If aggregate supply is vertical, what role does aggregate demand play in determining output ? In determining the price level ? Briefly explain.
Q: Show and explain by using a graph, what will happen to the price level and real GDP if the quantity…
A: The economy is in equilibrium E initially. The real GDP is Y and the price level is P. The price…
Q: Graphically illustrate the long-run aggregate supply curve. Explain how you derive this curve with…
A: In the long run, the aggregate supply curve is assumed to be vertical that is it does not change…
Q: Explain whether each of the following events shifts the short-run aggregate-supply curve, the…
A: When there is a reduction in household income tax, there is an increase in income for consumption…
Q: The following graph shows the short-run aggregate supply curve (AS), the aggregate demand curve…
A: If the bout of severe weather increases the agriculture cost, cost of transporting and cost of…
Q: The following graph shows the short-run and long-run aggregate supply curves (SRAS and LRAS) for an…
A: Shock can be defined as a change which can bring a shift in the aggregate demand or short-run…
Q: The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate…
A: Here the supply curve is the curve depicting how much production of manufacturing goods is being…
Q: There are three reasons the aggregate demand curve is downward sloping. What are they? Explain each…
A: Three reasons that show the Aggregate Demand curve is downward sloping: 1- Pigou's wealth effect. It…
Q: e Page 426 13.1. What is the aggregate demand-aggregate supply model? Fill in the blanks to complete…
A: Recessions in the United States have a long history in the United States, demonstrating that they…
Q: 3. Briefly explain why the following would cause the Aggregate Demand curve to shift to the right(an…
A: Aggregate demand = C + I + G + (X-M), C= consumption, I= Investment, G= Government spending, (X-M)…
Q: Explain whether each of the following events will increase decrease or have no effect on long run…
A: The Long-Run Aggregate Supply (LRAS) is the aggregate supply in the economy over the long haul. This…
Q: Now suppose that a boom in stock market causes aggregate demand to rise. Use your diagram to show…
A: Hey, thank you for the question. Since there are multiple questions posted, we will answer first…
Q: 1. Briefly explain why the following would cause the Aggregate Demand curve to shift to the right(an…
A: The aggregate demand is the summation of all the individual demand curves in the economy. There will…
Q: The following graph shows an increase in short-run aggregate supply (SRAS) in a hypothetical…
A: "Aggregate supply depicts the total amount of commodities or output sold by producers in a country…
Q: The following events shift either aggregate demand, aggregate supply, both or neither. Using a…
A: The equilibrium price is set up where the aggregate demand and aggregate supply are equal.
Q: What change does recession has on the price and output level when the change in aggregate demand is…
A: Recession: It is an economic situation or a phase of the business cycle in which the economy…
Q: Q2. Explain whether each of the following events will increase, decrease or have no effect on…
A: The long-run aggregate supply signifies the level of real output that an economy can develop by…
Q: Illustrate each of the following situations with a graph showing aggregate supply and aggregate…
A: Case 1: Increase in government spending while money supply held by the Fed is constant. The constant…
Q: Draw a diagram with aggregate demand, short-run aggregate supply, and long-run aggregate supply. Be…
A:
Q: What are three factors that help explain the slope of the aggregate demand curve? What is the most…
A: The slope of the Aggregate Demand curve is downward sloping. The three reasons include: 1-Pigou…
Q: Briefly explain what effect and why, a slowdown in Technological progress would have on the…
A: A slow down in technological progress would affect the aggregate supply as it is directly related to…
Q: The following events shift either aggregate demand, aggregate supply, both or neither. Using a…
A: Aggregate demand = C + I + G + (X-M), C= consumption, I= Investment, G= Government spending, (X-M)…
Q: For each of the following events, draw an aggregate-demand/aggregate supply diagram and explain the…
A: Aggregate demand and aggregate supply are two forces in the market that helps in analyzing the…
Q: What effect would an increase in aggregate demand have on price level and GDP?
A: Answer: Aggregate demand: It refers to the total demand for final goods and services in an economy…
Q: 20 The following graph shows the short-run aggregate supply curve (AS), the aggregate demand curve…
A: In the long run, equilibrium remains at full employment and output is equal to natural rate of…
Q: On the following graph, plot the aggregate demand curve that results from varying the price level…
A: The aggregate demand curve is a curve that represents the sum of the quantity of all goods and…
Q: Determine whether each of the following would cause a shift of the aggregate demand curve, a shift…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: What is the shape of the aggregate supply curve in the long run and in the short run? Explain the…
A: The AS {"aggregate supply"} is described as the total Q {"quantity"} of output that the firms will…
Q: 6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of…
A: Given; Quantity supplied=Natural level of output+α×Price levelActual-Price levelExpected where;…
Q: From March 2009 to 2013, the U.S. stock market more than doubled in value. How might this have…
A: When the U.S stock market more than doubled in value from March 2009 to 2013, this leads to more…
Q: Create a graph for a short-run aggregate supply curve. Use the variable ‘Price Level’ for the…
A: The supply curve represents graphically the supply schedule and it illustrates when there is an…
Q: aggregate supply
A: Out of the two, short term aggregate supply is more realistic and reflects the actual scenario of…
Q: In the model of aggregate demand and aggregate supply, the quantity of _____ is on the horizontal…
A: Answer to the question is as follows :
Q: 2. Briefly explain why the following would cause the Aggregate Demand curve to shift to the right(an…
A: Aggregate demand = C + I + G + (X-M), C= consumption, I= Investment, G= Government spending, (X-M)…
Q: “John Maynard Keynes introduced the AD-AS macroeconomic model (aggregate demand- aggregate supply)…
A: Aggregate demand curve shows the total value of the goods and services that are demanded at a…
Q: Graphically illustrate the long-run aggregate supply curve. Explain
A: In the long run, the aggregate supply curve is assumed to be vertical that is it does not change…
Q: If the economy’s labor force is increasing and also becoming more productive, what will happen to…
A: The whole supply of goods and services produced within an economy at a certain overall price in a…
Q: Illustrate each of the following situations with a graph showing the Short-run Aggregate Supply…
A: Hello, thanks for the question. Since you have posted many subparts here, only the first three…
Q: On the following graph, use the purple line (diamond symbol) to plot this economy's long-run…
A: Price Level SRAS 100 60+2(100-110) =40 105 60+2(105-110) =50 110 60+2(110-110) =60 115…
Q: The following graph shows a decrease in aggregate demand (AD) in a hypothetical country.…
A: Meaning of Aggregate Demand (AD): Aggregate demand can be defined as maximum expected sales proceeds…
Q: In your own words, explain why aggregate demand is inversely related to the price level. Why does…
A: AD curve is downward sloping because of three effects: Pigou’s wealth effect: Since value of…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Identify and briefly discuss the three reasons the aggregate demand curve slopes downward. Are these reasons the same as the reasons that the demand curve for an individual product, such as bananas, slopes downward? Briefly explain.What are the four reasons why aggregate demand curves might shift? Briefly explain each one of them.The following event has occurred in the history of the United States: The world oil price rises sharply. Explain for event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.
- The following graph shows an increase in short-run aggregate supply (SRAS) in a hypothetical economy. Specifically, short-run aggregate supply shifts to the right from SRAS₁ to SRAS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. Review the graph and then complete the table that follows. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 50 SRAS SRAS₂ 100 150 200 250 300 350 400 REAL GDP (Billions of dollars) ? The following table lists several determinants of short-run aggregate supply. Complete the table by indicating the change needed in each determinant to increase short-run aggregate supply. Determinant Change Needed to Increase SRAS Input Prices increase or decrease Burdensome Regulations increase or decrease Technology decline or improvement1. Briefly explain why the following would cause the Aggregate Demand curve to shift to the right(an increase), or to the left(a decrease):a significant decrease in the value of real estate in the U.S.In the following table, determine how each event affects the position of the aggregate demand curve.
- The following graph shows an aggregate demand curve (AD) illustrating the inverse relationship between the price level and the quantity of Real GDP in the United States. During World War II, the United States increased military spending. Show the effect of the following scenario on the aggregate demand curve by dragging the curve or moving the point to the appropriate position. Note: Tool tip: To move the curve, click and drag any part of the curve. The curve will snap into position, so if you try to move it and it snaps back to its original position, just try again and drag it a little farther. PRICE LEVEL Aggregate Demand I I " I 1 REAL GDP AD AD (?)Briefly explain how each of the following events would affect the aggregate demand curve a) an increase in the price level b) an increase in government purchases c) higher federal corporate income taxesUse the following table to answer the questions below. Aggregate Price Level Output (SRAS) Output (Aggregate Demand) 150 1,000 200 125 800 400 100 600 600 75 400 800 50 200 1,000 Graph the aggregate demand (AD) and the short-run aggregate supply (SRAS) curves. Label them AD1 and SRAS1. What are the aggregate output (Y) and the aggregate price level? Assume aggregate demand grows by 200 at each price level. Graph the new AD and label AD2. What are the new aggregate output (Y) and the aggregate price level? If full-employment output is 600, is the economy experiencing recessionary or inflationary pressures? If the economy experiences “self-correction”, how much would the SRAS curve need to shift in order for the economy to return to full-employment output at 600? What would be the new equilibrium aggregate price level.
- Use the following graph to answer the following questions. Line Y Price level (P) 100 80 B Line Z Line X2 Line X1 Real GDP (3) If point A occurs chronologically before point B, then this graph could represent a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply. a decrease in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in long-run aggregate supply. an increase in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in short-run aggregate supply.The following graph shows the short-run and long-run aggregate supply curves (SRAS and LRAS) for an economy. Suppose there is a technological improvement that allows firms to reduce their costs of production permanently. Drag one or both of the curves on the graph to illustrate the long-term effects of this change. If you don't believe there will be any long-term effects, leave the curves where they are. 240 LRAS SRAS 200 SRAS 160 LRAS 120 80 40 6 12 18 24 REAL GDP (Trillions of dollars) Assuming aggregate demand is not affected by the technological improvement, the long-run effect of this v supply shock is v in aggregate output and v in the price level. PRICE LEVELThe following event has occurred in the history of the United States: S. businesses expect future profits to fall. Explain for event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.