In the graph below, the equilibrium price level and the equilibrium real GDP are found where the two curves If the actual price level exceeds the equilibrium price level, then it is the case that AD ◆ the economy's production potential (LRAS). If the actual price level is below the equilibrium price level, then it is the case that (AD) the economy's production potential (LRAS). Price Level LRAS₁ A Real GDP ($ trillions per year) AD₁

In the graph below, the equilibrium price level and the equilibrium real GDP are found where the two curves If the actual price level exceeds the equilibrium price level, then it is the case that AD ◆ the economy's production potential (LRAS). If the actual price level is below the equilibrium price level, then it is the case that (AD) the economy's production potential (LRAS). Price Level LRAS₁ A Real GDP ($ trillions per year) AD₁

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What are some example possible reasons for a decline in the level of potential GDP?
Please note I have completed some of this myself, however I need you to finish it up. Thanks! Suppose that annual output in year 1 in a 3-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the prices in both years are $4 per quart for ice cream, $3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy’s nominal GDP in year 1? Show the calculation. Year one (3*$4)+(1*$3)=$12+$3+$6=$21 Recall that GDP is the core measure of an economy's health. Nominal GDP (also known as current–dollar economic statistics) is not adjusted to account for any price changes. To calculate nominal GDP (the value of all final goods and services evaluated at current-year prices) you have to use the formula: Nominal GDP= P*Q. To get a real picture of a nation's economic growth economists prefer using real GDP. To calculate real…
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To answer Questions #1 through #4 use the following information: Suppose that in the nation state of Raleighville there are 2 final goods produced in the economy - dog food and kitten chow. Suppose the economy produces 15 units of dog food and 5 units of kitten chow in 2000 (the base year), and 20 units of dog food and 10 units of kitten chow in 2020. Further suppose the price of dog food was $1.00 per unit in 2000, and $3.00 per unit in 2020; whereas the price of kitten chow was $1.00 in 2000 and $2.50 in 2020. What was the real GDP for Raleighville in 2020? Oa. $20.00 O b. $30.00 Oc. $57.50 Od. $85.00 Next page page
To answer Questions #1 through #4 use the following information: Suppose that in the nation state of Raleighville there are 2 final goods produced in the economy - dog food and kitten chow. Suppose the economy produces 15 units of dog food and 5 units of kitten chow in 2000 (the base year), and 20 units of dog food and 10 units of kitten chow in 2020. Further suppose the price of dog food was $1.00 per unit in 2000, and $3.00 per unit in 2020; whereas the price of kitten chow was $1.00 in 2000 and $2.50 in 2020. What was the real GDP for Raleighville in 2000? O a. $20.00 O b. $30.00 O c. $57.50 O d. $85.00 Next page
17 01:27:36 Use the following diagrams for the U.S. economy to answer the next question. AS₁ AS₂ 这 AD Real GDP (1) AS₂ AS, * AD (3) Real GDP (2) NY AD₂ AD₁ Real GDP AD₂ Real GDP AD₁ If the economy is initially at full employment, which of the diagrams best portrays a recession resulting from a decrease in government purchases?
In 2022, Tom spent $70,000 renovating his house. In the same year, he sold his house to a couple from Bacchus Marsh for $850,000. As part of the sale, Tom paid $17,000 for real estate agent fee, $8,000 for advertising fee and $95,000 for capital gain tax. Considering all of the above numbers, how much would GDP in 2022 increase by? A) $850,000, which is how much Tom sold the house for B) $95,000 C) $190,000 D) $0, GDP would be unchanged because the sale of this already established house is considered the sale of a second-hand good.
Based on the data in the table and graph below, identify the equilibrium GDP: Price Level Real GDP/Output in $ billion Real GDP/Spending in $ billion 80 100 180 90 120 160 100 140 140 110 160 125 120 170 115 130 175 105 140 178 100
In the first quarter of 2020, US real GDP declined about 9%, due to the economics shocks from the Covid 19 virus. If prices were completely flexible, and this means all prices, both inputs (such as labor), as well as output prices, what would you think would have been the drop in GDP? If prices are completely fixed, would the drop in GDP be greater or less than the flexible case? Why? If the Expenditure method of accounting for GDP, has to equal the Income Side, and the economy overproduces a particular item, say automobiles, the income side will also be higher, workers will buy the extra cars with extra income and the economy can gyrate indefinitely higher? Why or why not?
So far, we have learned to measure real GDP, but how do we end up with that real GDP? Of all of the different amountsof national income and price levels that might exist, how do we gravitate toward the one that gets measured each year asreal GDP?In short, it is the interaction of the buyers and producers of all output that determines both the national income (real GDP)and the price level. In other words, the intersection of aggregate demand (AD) and short-run aggregate supply (SRAS)determines the short-run equilibrium output and price level.Once we have a short-run equilibrium output, we can then compare it to the full employment output to figure out where inthe business cycle we are. If current real GDP is less than full employment output, an economy is in a recession. If currentreal GDP is higher than full employment output, an economy is experiencing a boom. If the current output is equal to thefull-employment output, then we say that the economy is in long-run equilibrium. The…
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