Answered: If the AD curve is relatively flat, the…

If the AD curve is relatively flat, the Fed is willing to accept large changes in output to keep the price level stable. Select one: True

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the economy is in equilibrium when aggregate demand curves shifts to the right. What happens to the economy in the short-run? the GDP gap becomes positive. Allowed to self-correct, the economy will experience higher inflation. the GDP gap becomes negative. Allowed to self-correct, the economy will experience higher inflation. the GDP gap does not change, but the inflation rate will rise. there is not enough information to answer the question.
Assume the Country C’s economy is in recession: Country C implements a combination of expansionary fiscal and monetary policy. In the absence of complete crowding out what will be the effect on Aggregate demand, price level and interest rates in country C.
Which of the following explain why the aggregate demand (AD) curve is downward sloping? Check all that apply. The net exports effect The income effect The interest-rate effect The real balances effect Although the AD and market demand curves are both downward sloping, the two concepts are different because the AD curve deals with prices and a, while the market demand curve deals with prices and a
If equilibria below potential output are self-correcting, the economy will spend a great deal of time on the horizontal part of the aggregate supply curve. True (or) false
Fiscal policy is used to shift AD. The outcome depends on the shape of the AS curve - whether AS is upward sloping, vertical or horizontal. It follows that a right shift in aggregate demand will cause no change in price level or output if AS is upward sloping. higher price level, but not higher output if AS is vertical. higher price level, but no change in output if AS is horizontal. higher output, but no change in price level if AS is vertical.
Suppose that the full employment level of nominal GDP rises in one year from $16.8 to $18.0 trillion. The long-run equilibrium price level, however, remains unchanged at 120. By how much (in real dollars) has the long-run aggregate supply curve shifted to the right from one year to the next? $ trillion. (Round your answer to two decimal places.)
Q1: Illustrate each of the following situations with a graph showing AS and AD curves, and explain whathappens to the equilibrium values of the price level and aggregate output:a: A decrease in G with the money supply held constant by the Fed.b: a decrease in the price of oil with the money supply held constant by the Fed.
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…
Suppose that a given economy, in which the level of production (Y) is not at the natural level (Yn), an economy in which Y#Yn. 1) Using the AS/AD model, give an explanation of what will happen in the future and suggest a fiscal and/or a monetary policy to adjust the output and further analyse the effect of the suggested policy on employment and price level. 2) Illustrate your answer in part 1) by presenting and analysing data from the UK by identifying two occasions since 1950 (each covering a span of 2-5 years), where such an adjustment process occurred.
True or False: An increase in the price level will shift the LM curve to the right.
Suppose the economy begins in a short-run recessionary equilibrium. As price expectations and wages adjust and the economy moves from the short-run equilibrium to the new long-run equilibrium, a- consumer spending increases as prices fall and the AD curve shifts to the left b- consumer spending increases as prices fall and the AD curve shifts to the right c- consumer spending increases as prices fall generating a movement along the AD curve d- government spending rises as shown by a movement along the AD curve
Again, the following graph shows the economy in long-run equilibrium at the expected inflation rate of 3% and the natural level of output of $600 billion, before the decrease in consumption spending associated with the housing market contraction. During the transition from the short run to the long run, price-level expectations will curve will shift to the Now show the long-run impact of the housing market slump by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions. INFLATION RATE (%) 00 6 5 2 1 0 0 200 400 600 800 OUTPUT (Billions of dollars) AS AD 1000 1200 In the long run, as a result of the housing market slump, the inflation rate natural level of output, and the unemployment rate AD D AS ? and the the quantity of output the natural rate of unemployment. the