Price level a aa a LRAS AS AD₁ YcY₁ Yo AS AD₂ Real GDP per year (Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a. Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at Oab. They rationally adjust their behavior and the aggregate demand curve shifts to the left and b becomes the new equilibrium point Ob.c. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point Ocd They rationally adjust their behavior and the aggregate demand curve shifts to the left and d becomes the new equilibrium point Odd They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point

Price level a aa a LRAS AS AD₁ YcY₁ Yo AS AD₂ Real GDP per year (Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a. Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at Oab. They rationally adjust their behavior and the aggregate demand curve shifts to the left and b becomes the new equilibrium point Ob.c. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point Ocd They rationally adjust their behavior and the aggregate demand curve shifts to the left and d becomes the new equilibrium point Odd They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following scenarios would result in a decrease in Aggregate Demand? R A decline in investors confidence causes investment to fall. O Technology improvements lead to productivity gains O A rise in imports from Europe f5 O The congress passes a new income tax cut. 100 % 5 16 T e 6 6 3 Y ly 7 7 U 8 f10 num lk. 8 9 5 9 f12 F
question 2: In Figure 2, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation, and recession?
The Economy in 2008In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. Refer to The Economy in 2008. Given the effects of the financial and housing crisis on the price level and output and the effects of increased world commodity prices on the price level and output, the aggregate demand and aggregate supply model tells us that a. output rises and the price level falls. b. output may rise, fall or stay the same and the price level rises. c. output falls and the price level may rise, fall or stay the same. d. None of the above is correct.
what is being illustarted in a shift in aggregate demand from AD0 to AD2?
1. Imagine an economy, where the SRAS in terms of inflation is given by II=5+Y, where Y is output. Imagine that the long run AS curve is given by Y=2. (25 marks) a) Give the equation of the AD curve (you can take liberties), if we assume that initially, the economy is at its long-run equilibrium. Justify. b) Imagine that your chosen AD curve's intercept goes up by one unit due to an expansionary monetary policy. What will be the new final equilibrium after this change? Justify. c) What will be the equilibrium after two periods of adjustment? Justify. d) Assume that before all the changes in the economy, in the initial, long-run equilibrium, the interest rate was 4 percent. Give an IS and an LM curve that are compatible with this initial equilibrium. Justify. e) What are the IS and LM curves going to be at the very end of the adjustment process, i.e., in the new long run equilibrium? Justify.
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Explain why the aggregate supply(AS) curve gets steeper as real GDP increases.. . . DO NOT COPY AND PASTE. please be precise to the question and answer in OWN WORDS.
QI. Suppose that in the coming monetary policy, central bank is planning to adopt expansionary monetary policy, so what will be its effect on AD? And then show this effect both on Short run aggregate supply curve (SRAC), and Long Run aggregate supply curve (LRAC), and what will its effect on prices and output?
In the medium run, if government purchases are increased and nominal money supply is decreased, we can expect that a. the interest rate will increase while aggregate demand and prices may increase, decrease, or remain the same b. aggregate demand and prices will increase but interest rates will not change c. aggregate demand and interest rates will decrease but prices will increase d. aggregate demand, prices, and the interest rate will all decrease e. the AD-curve will shift to the right and the AS-curve will shift to the left
The reason/s for the downward aggregate demand curve include: Select one: a. interest rate effect b. exports effect c. real balances effect d. none of the answers are correct e. all the answers are correct
.Explain why aggregate demand (AD) curve is negatively sloped by taking the link between the goods market and money market