Instructions: Enter your responses as a whole number. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ billion. Suppose that full-employment GDP is $12 billion. The real GDP gap is $ billion. Aggregate demand must shift (left or right) by $ billion to achieve the full-employment equilibrium.Real GDP (in billions of dollars per year)

Instructions: Enter your responses as a whole number. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ billion. Suppose that full-employment GDP is $12 billion. The real GDP gap is $ billion. Aggregate demand must shift (left or right) by $ billion to achieve the full-employment equilibrium.Real GDP (in billions of dollars per year)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The task I am struggling with: The economy is in short-run macroeconomic equilibrium at point E1 in the accompanying diagram (see the picture). Based on the diagram, answer the following questions. a) Is the economy facing an inflationary or recessionary gap? b) What policies can the government implement that might bring the economy back to long-run macroeconomic equilibrium? Illustrate with a diagram. c) If the government did not intervene to close this gap, would the economy return to long-run macroeconomic equilibrium? Explain and illustrate with a diagram.Thank you very much for your help.
4 Exhibit 11-2 Aggregate demand and supply model 110 Price level 105 (CPI) 100 95 E NE Full employment. AS AD₁ AD 5.0 5.1 Real GDP (trillions of dollars per year) Suppose the economy in Exhibit 11-2 is in equilibrium at point E, and the marginal propensity to consume (MPC) is 0.9. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by increasing government spending by $_____ billion.
Suppose AE = 0.50 Y + 500. If GDP = $1,000, and There will be excess supply, so inventory will accumulate and firms will reduce output next period. There will be excess demand, so inventory will shrink and firms will increase output next period. There will be neither excess demand nor excess supply, so Y = $1,000 is the equilibrium level of GDP.
The graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE2. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE3. 16 14- 12- 10- 10 Aggregate expenditure (trillions of 2009 dollars) A 45 degree line 11 12 13 14 Real GDP (trillions of 2009 dollars) Click the graph, choose a tool in the palette and follow the instructions to create your graph. 15 AE 16 17
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The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300 billion. Suppose households suddenly begin to spend less and save more in order to increase saving for retirement. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase in saving. PRICE LEVEL 240 200 160 120 8 40 0 0 100 200 300 400 OUTPUT (Billions of dollars) AS AD 500 600 AD AS A In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to price level people expected and the quantity of output to the unemployment rate to the the natural level of output. The sharp increase in saving will cause the natural rate of unemployment in the short run.
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