Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run.For example, an increase in the money supply, avariable, will cause the price level, avariable, to increase but will haveno long-run effect on the quantity of goods and services the economy can produce, avariable. The distinction between real variablesand nominal variables is known asIn the short run, however, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demandand aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incompleteshort-run aggregate demand (AD) and aggregate supply (AS) diagram-it needs appropriate labels for the axes and curves. You will identify some ofthe missing labels in the questions that follow.ASADHORIZONTAL AXISVERTICAL AXIS~) ASADHORIZONTAL AXISThe horizontal axis of the aggregate demand and aggregate supply model measures the overallThe aggregatecurve shows the quantity of goods and services that firms produce and sell at each price level.VERTICAL AXIS

Economic Variable is defined as a measurement which describes economic units such as interest rates,…

Answered: Most economists believe that real…

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 model of aggregate demand and aggregate supply is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model. is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted. is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.
In the short run, what is the impact on the price level and the level of real GDP of each of the following changes. Analyze graphically and explain. a) a decrease in the cost of a non labor input, such as oil or electricity. b) a decrease in interest rates in the U.S.(relatively to interest rates abroad) c) a decrease in the value of the U.S. dollar(dollar depreciates)
In the following figure, an economy is currently in short-run equilibrium at point a. What is likely to happen in the long run? LRAS SRAS a AD AD Aggregate Output (0) SRAS will shift to the left and the aggregate price level will decrease. SRAS will shift to the right and the aggregate price level will decrease. SRAS will shift to the right and the aggregate price level will increase. SRAS will shift to the left and the aggregate price level will increase. Aggregate Price Level (P)
Classify the following as microeconomics or macroeconomics and provide a justification for your response. A comparison of alternative tax policies and their respective impacts on the rate of the nation’s economic growth The decision by McDonald’s to hire fewer workers because of an increase in the minimum wage. Susan’s decision about how much income to save The central bank announces that it is increasing the discount rate in an effort to slow the rate of inflation. Question 2 A snowboard company currently hires 10 skilled employees who are paid a weekly wage of $1,000.00. the cost of capital is $3000 and it is fixed, which means that it does not vary with output. The company is currently producing 240 snowboards. The company’s cost will be $13,500 if it produces an additional snowboard. A customer is willing to pay $550 for the 241st snowboard. Should the company produce and sell it? Timothy quits his job which pays $84000 a year, to enrol in a 2-year…
A friend of yours expresses the opinion that the only resource that is important in the macroeconomy is money. He says, “The more money an economy has, the richer it is.” How would you respond?
The long run in macroeconomics is the period of time in which prices do not change or do not change very much. True False Cliok to select your answer.
Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes both the short run and the long run. the short run, but not the long run. the long run, but not the short run. neither the long run nor the short run
For each scenario below, identify which determinant is playing a role in the Pumpkin Spice scenario
The Federal Reserve Bank of Atlanta releases its monthly Wage Growth Tracker to study trends in wages across various industries. One interesting issue is whether wages rise faster for those who stay in their current jobs (job stayers) or those who seek new opportunities (job switchers). According to the data, job stayers tend to do better than job switchers during a recession. But when the labor market is strong, job switchers experience higher wage growth than job stayers. a. During a recession, job stayers do better than job switchers because a.labor demand increases and job switchers can find jobs with higher wages. b.labor supply decreases and job switchers can find jobs with higher wages. c.labor demand decreases and job switchers cannot find jobs with higher wages. b. When the labor market is strong, job switchers experience higher wages than job stayers because a.labor demand decreases and job switchers cannot find jobs with higher wages. b.labor supply…
A technological improvement raises productivity. On the following graph indicate the short run and long run effects of this change on the economy, assuming policymakers take no action. In the short run, the price level blanks and output blank. In the long run, the price level will be blank and output will be blank compared to the initial equilibrium prior to the change
Price Level AS P1 AD1 AD National income (real GDP) Y Y1 Copyright: www.economicsonline.co.uk Answer the following guide questions. Based on the graph above... a.What happens to the aggregate demand? Describe your answer. b.What happens to the level of output? Describe your answer. c.What happens to the price level? Describe your answer.

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