Price Level (average price) 1 5.8 Point a and point b. Point a and point d. Point b and point e. Point a and point e. 6.0 C AD a 6.2 QF AS AD2 Real Output (trillions of dollars per year) AD3 Figure 11.3 Refer to Figure 11.3. Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion. The aggregate demand shortfall is equal to the distance between

Price Level (average price) 1 5.8 Point a and point b. Point a and point d. Point b and point e. Point a and point e. 6.0 C AD a 6.2 QF AS AD2 Real Output (trillions of dollars per year) AD3 Figure 11.3 Refer to Figure 11.3. Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion. The aggregate demand shortfall is equal to the distance between

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.
19. Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which subsequently drove up natural gas, gasoline, and heating oil prices. Three years later, once the refining capacity was restored, these prices came back down. The restoration of refining capacity should A) shift the short-run aggregate supply curve to the left. B) shift the short-run aggregate supply curve to the right. C) move the economy up along a stationary short-run aggregate supply curve. D) move the economy down along a stationary short-run aggregate supply curve. 21. Long-run macroeconomic equilibrium occurs when A) aggregate demand equals short-run aggregate supply. B) aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve. C) structural and frictional unemployment equals zero. D) output is above potential GDP.
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15. Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result, A) the long-run aggregate supply curve will shift to the right. B) the long-run aggregate supply curve will shift to the left. C) the economy will move up along the long-run aggregate supply curve. D) the economy will move down along the long-run aggregate supply curve. 16. Which aggregate supply curve has a positive slope? A) long-run only B) short-run only C) both long-run and short-run D) neither long-run nor short-run
3. Why the aggregate demand curve slopes downward The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $500 billion, and the price level is 120. Moving up along the AD curve from point X to point Y, the quantity of output demanded falls to $300 billion, and the price level rises to 140. PRICE LEVEL 170 160 150 140 130 120 110 100 90 Y X AD (?
Which of the following would cause the Aggregate Supply curve to move from AS to AS2 in the graph below? Price Level 150 140 130 120 110 100 90 80 70 60 0 5 10 15 Real GDP ($ billion) AS -AD-AS2 O A federal government increase in spending. O A general increase in energy and labor cost for businesses. O An increase in productivity. O A general decrease in labor cost for businesses. 20 25
Refer to the information provided in Figure 26.1 below to answer the question(s) that follow. AS T.500 Aggregate output (income) (Y) (billions of dollars) Refer to Figure 26.1. This economy reaches capacity at Select one: a. $500 billion b. $1,500 billion C. an output level that is indeterminate from this information because aggregate demand is not given d. $1,000 billion Price level
28. Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo, and AD1 and AS1 represent changes, which of the above graphs depict the economy's self-correcting mechanism at work? a) Figures A & B b) Figures A & C c) Figures C & D d) Figures B & D
170 Price 140 level 120 100 D AD5 AD4 AD 3 AD, AD2 3.0 4.0 5.0 6.0 7.0 8.0 Real GDP In Exhibit 20-8, if aggregate demand shifts from AD₁ to AD3, O a. real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. Ob. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120. Oc. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140. Od. real GDP will increase from $3.0 to $4.0, and the price level does not change.
Price level Potential output SRAS P3 PI P2 Real GDP Y1 Y3 Refer to Exhibit 10.1, which shows the short-run aggregate supply (SRAS) curve of an economy. At a price of P2, firms will O supply less than potential output. O supply more than potential output. O supply potential output. O increase prices. O decrease prices.
Suppose that the dynamic aggregate demand curve in Swaziland is determined by the equation M + U-6%. Using this information, draw Swaziland's dynamic aggregate demand curve on the graph. 14 13 12 Aggregate deman 10 8 5 4 3 2 -4 -3 2 1 0 1 2 3 45 678 9 10 Real GDP growth rate
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