Price Level4. Problems and Applications Q1Suppose the economy is in a long-run equilibrium, as shown in the following graph.Now suppose that a stock market crash causes aggregate demand to fall.Use your diagram to show what happens to output and the price level in the short run.LRASQuantity of OutputAggregate SupplyAggregate Demand10Aggregate SupplyAggregate DemandLRAS(?)As a result of this change, the unemployment rateUse the sticky-wage theory of aggregate supply to think about what will happen to output and theprice level in the long run (assuming there is no change in policy).On the graph, illustrate the change that will occur in the long run.

Initially, the economy is in a long-run equilibrium where the aggregate demand (AD) equals the…

Answered: Price Level 4. Problems and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In order to improve the living standards of the people in Philippines after the devastating typhoon Haiyan, the government decided to increase the labour wage per hour from AUD 17.50 to AUD 25.00. Also, Philippines experienced structural unemployment and frictional unemployment. The figure below indicates that the aggregate demand curve slopes left to right downwards. 1)Explain the factors that account for the shape of the Aggregate demand curve. Graph:
The table below shows the initial aggregate demand, short-run, and long-run aggregate supply schedules - Price level Aggregate demand (billion $) Aggregate Supply (billion $) Long run Aggregate supply (billion $) 80 1600 400 800 90 1400 600 800 100 1200 800 800 110 1000 1000 800 120 800 1200 800 130 600 1400 800 140 400 1600 800 h. Is there positive or negative cyclical unemployment ? i. Do you have to Increase or decrease GDP? j. Should the country implement expansionary or contractionary policy?
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Aggregate Price Level The graph below shows the long-run aggregate supply (LRAS), the short-run aggregate supply (SRAS), and aggregate demand (AD) curves for a given economy. Manipulate the curves to show the short run effect of a increase in money supply. LRAS Real GDP AD In the short-run, an increase in the money supply will result in: SRAS Interest rates... Select answer The aggregate price level... Select answer Real GDP... Select answer " イト

Explaining short-run economic fluctuations
1. Problems and Applications Q1 Suppose the economy is in a long-run equilibrium, as shown in the following graph. Now suppose that firms become pessimistic about future business conditions and decide to cut back on investment spending, resulting in a fall in aggregate demand. Use your diagram to show what happens to output and the price level in the short run. Price Level LRAS Aggregate Supply Aggregate Demand Quantity of Output As a result of this change, the unemployment rate Aggregate Demand Aggregate Supply LRAS ? Use the sticky-wage theory of aggregate supply to think about what will happen to output and the price level in the long run (assuming there is no change in policy).
QUESTION 9 The graph below reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to? Price Level P₂ P₁ Y2 Yi AS' AS AD Real National Income a. an increase in economic growth b. an increase in input prices c. a decrease in the natural unemployment rate d. less inflationary pressures
15. The late 1990s in the United States were characterized by substantial economic growth with low inflation; that is, real GDP increased with little, if any, increase in the aggregate price level. Explain this experience using aggregate demand and aggregate supply curves. Illustrate with a diagram.
35
rview - eBay S... ➜ Oculus AasightCH. Score: 31/87 40/70 answered Question 33 1200+ 1100- 1000- 900- 800- 700- 1600- 500- Price Level 400- 300- 200 100- Google Cloud ser... AD SMOOT The graph below shows the Long-Run Aggregate Supply Curves (LRAS) for the US. ▼ Hint LRASI LRASI Leaf Dashboard LRAS2 100 200 300 400 500 600 700 800 90010001100120 Real GDP What event could shift LRAS from LRAS1 (black color) to LRAS2 (red color) in the US? O Increase in capital. O Decrease in labor. O Decrease in human capital. HEX PROXIES Sc
1) What effects might each of the following have on aggregate demand/aggregate supply? In each case use a diagram to illustrate the effect, explain why shifts occurred, and state the impact of each event on the price levels, the unemployment rate, and real GDP. a. Congress passes into law a $1.5 billion cut in personal income taxes. b. Significant technological advances in the renewable energy sector decrease the price of all electricity by 50% c. Increases in consumer confidence lead to a positive demand shock.

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