Suppose an economy is in long-run equilibrium. The centrabank reduces the money supply by 5 percent.Use your diagram to show what happens to output and theprice level as the economy moves from the initial to the newshort-run equilibrium.LRASAggregate Supply*Aggregate DemandQuantity of OutputAggregate DemandAggregate SupplyNow adjust the graph to show the new long-run equilibrium.What causes the economy to move from its short-runequilibrium to its long-run equilibrium?O Nominal wages, prices, and perceptions adjust upward to this new price level.The government increases spending to increase aggregate demand.The government increases taxes to curb aggregate demand.O Nominal wages, prices, and perceptions adjust downward to this new price level.Which of the following is true according to the sticky-wagetheory of aggregate supply as a result of the decrease in thmoney supply? Check all that apply.Nominal wages at the initial equilibrium are equal to nominal wages at the new short-run equilibrium.Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium.Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium.Real wages at the initial equilibrium are equal to real wages at the new long-run equilibrium.Judging by the impact of the money supply on nominal anreal wages, this analysis consistent with the propositionthat money has real effects in the short run but is neutral ithe long run.

The total demand for goods and services in the economy is represented by aggregate demand (AD).…

pose an economy is in long-run equilibrium. The centra k reduces the money supply by 5 percent. your diagram to show what happens to output and the e level as the economy moves from the initial to the new rt-run equilibrium. LRAS Aggregate Supply Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply v adjust the graph to show the new long-run equilibrium. at causes the economy to move from its short-run ilibrium to its long-run equilibrium? Nominal wages, prices, and perceptions adjust upward to this new price level.

pose an economy is in long-run equilibrium. The centra k reduces the money supply by 5 percent. your diagram to show what happens to output and the e level as the economy moves from the initial to the new rt-run equilibrium. LRAS Aggregate Supply Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply v adjust the graph to show the new long-run equilibrium. at causes the economy to move from its short-run ilibrium to its long-run equilibrium? Nominal wages, prices, and perceptions adjust upward to this new price level.

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 economy is depicted in the graph to the right. a. Suppose, there are new discoveries of key raw materials. Which of the following best describes the result of this event? O A. The short-run aggregate supply curve shifts out while the long-run aggregate supply curve shifts in. OB. Both the short-run and long-run aggregate supply curves shift outward. OC. The short-run aggregate supply curve shifts inward while the long-run aggregate supply curve shifts outward. OD. Both the short and long-run aggregate supply curves shift inward. b. Complete the diagram. 1.) Using the line drawing tool, draw the new long-run aggregate supply curve representing this shock. Label it as LRAS,. 2.) Using the 3-point curved line drawing tool, draw the new SRAS representing this shock. Label it 'SRAS,'. Carefully follow the instructions above, and only draw the required objects. to search O
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PRICE LEVEL O a. C to D. Ob. D to C. Oc.B to A Od. A to B. D LRAS O B AD QUANTITY OF OUTPUT SRAS, SRAS AD Refer to Figure 34-2. If the economy is in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from
ans ences rations If in Year 1 the price level was 100 and real GDP was $20 trillion and in Year 2 the price level was 105 and real GDP was $21 billion, then the predominant change that occured in Year 2 was OA a decrease in aggregate demand. B. an increase (shift to the right) in short-run aggregate supply. OC. a decrease (shift to the left) in short-run aggregate supply OD. an increase in aggregate demand.
01 10 CO xp 381 In the figure, the economy is at an equilibrium with real GDP of $20 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts, because 0 0 0 0 0 A. aggregate demand; leftward; the money wage rate rises B. aggregate supply: rightward; the money wage rate falls OC. potential GDP; leftward; the money wage rate falls D. aggregate demand; rightward; the money wage rate falls OE. aggregate supply; leftward; the money wage rate rises 130- 120- 110- 100- Price level (GDP price Index, 2012 = 100) Potential GDP 90- AS AD 19.0 19.5 20.0 20.5 21.0 21.5 22.0 Real GDP (trillions of 2012 dollars) ✓ ✓ 5
A change in which of the following would shift theshort-run aggregate-supply curve but not the longrun aggregate-supply curve?a. the labor forceb. the capital stockc. the state of technologyd. the expected price level
Which of the following causes the short-run aggregate supply curve to shift to the right? O A. an increase in the expected price of an important natural resource B. a positive technological change O C. a higher expected future price level O D. a decrease in the capital stock
Price Level Long-run AS Y, Y₁ Short-run AS Quantity of Real Output Suppose the economy is operating in a recession such as point B in the graph. If policymakers allow the economy to adjust to the long-run natural level on its own O a people will reduce their price expectations and aggregate demand will shift right O b. people will reduce their price expectations and the short-run aggregate supply will shift right Opeople will raise their price expectations and the short-run aggregate supply will shift left O d. people will raise their price expectations and aggregate demand will shift left
Figure 34-3 PRICE LEVEL a a a LRAS Y, Y₂ QUANTITY OF OUTPUT SRAS. SRAS. AD Refer to Figure 34-3. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a falling price level and a falling level of output, as the economy moves to point C. falling price level and a rising level of output, as the economy moves to point A. rising price level and a falling level of output, as the economy moves to point A. Orising price level and a rising level of output, as the economy moves to point C.
Suppose the economy is in the long-run equilibrium. b. Now suppose war in the world's main oil- producing region sharply reduces the world oil supply, causing oil prices to rise and increasing the costs of producing goods and services in this economy. Use your diagram to show what happens to output and the price level in the short run. c. Use the sticky-wage theory of aggregate supply to explain what will happen to output and the price level in the long run (assuming there are no policy changes). What role does the expected price level play in this adjustment? Be sure to illustrate your analysis in a graph.
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