Price Level0D(CMultiple Choice(AAS₂AS,(BAD₁Q₂ Q₁ Q₂Real Domestic OutputAD₂Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If there is cost-push inflation in this economy and thegovernment pursues an expansionary fiscal policy, then in the long run theprice level will rise from P₁ to P3 and real output will be Q₁.price level will rise from P₁ to P2 and real output will be Q2.price level will be P₁ and real output will be Q₁. Q₂ Q₁ Q₂Real Domestic OutputRefer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If there is cost-push inflation in this economy and thegovernment pursues an expansionary fiscal policy, then in the long run theMultiple Choiceprice level will rise from P₁ to P3 and real output will be Q₁.price level will rise from P₁ to P2 and real output will be Q2.price level will be P₁ and real output will be Q₁.price level will rise from P₁ to P2 and real output will be Q3.

Demand is the willingness and ability of an individual to buy a good. It is influenced by consumers'…

Price Level D (C Multiple Choice A AS, AS, B AD, Q₂ Q₁ Q₂ Real Domestic Output AD₂ Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If there is cost-push inflation in this economy and the government pursues an expansionary fiscal policy, then in the long run the price level will rise from P to P3 and real output will be Q₁. price level will rise from P to P2 and real output will be Q2. price level will be P₁ and real output will be Q₁.

Price Level D (C Multiple Choice A AS, AS, B AD, Q₂ Q₁ Q₂ Real Domestic Output AD₂ Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If there is cost-push inflation in this economy and the government pursues an expansionary fiscal policy, then in the long run the price level will rise from P to P3 and real output will be Q₁. price level will rise from P to P2 and real output will be Q2. price level will be P₁ and real output will be Q₁.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Fiscal policy is used to shift AD. The outcome depends on the shape of the AS curve - whether AS is upward sloping, vertical or horizontal. It follows that a right shift in aggregate demand will cause no change in price level or output if AS is upward sloping. higher price level, but not higher output if AS is vertical. higher price level, but no change in output if AS is horizontal. higher output, but no change in price level if AS is vertical.
Consider a fictional economy that is operating at its long-run equilibrium. The following graph shows the aggregate demand (AD) curve and short-run aggregate supply (AS) curve for the economy. The long-run aggregate supply curve is represented by a vertical line at the potential GDP level of $6 trillion. The economy is initially producing at potential GDP. Suppose that fiscal authorities decide to decrease marginal tax rates. Assume that this change in marginal tax rates is perceived as a long-term change. Shift the appropriate curves to illustrate the supply-side view of the fiscal policy effect on output and the price level. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. 120 Potential GDP AS 100 PRICE LEVEL 60 80 60 40 40 20 20 0 0 2 4 6 8 AD 10 12 QUANTITY OF OUTPUT (Trillions of dollars) AD 1 AS Potential GDP True or…
Price Level(average price) 40 38 36 34 32 AD 1 30 28 26 24 22 20 0 AD 2 2 4 AD 3 AS 6 8 10 12 14 16 18 20 Real Output (quantity in billions per year) Suppose the economy is at full employment when AD = AD3. a. The GDP gap when the demand curve is at AD2 is $ 7 billion b. Would this mean the economy is in a recession or expansion? Recession
Suppose that the full employment level of nominal GDP rises in one year from $16.8 to $18.0 trillion. The long-run equilibrium price level, however, remains unchanged at 120. By how much (in real dollars) has the long-run aggregate supply curve shifted to the right from one year to the next? $ trillion. (Round your answer to two decimal places.)
For this problem, you will analyze the following component of GDP: ... O ...consumption [variant 1]... O ...investment [variant 2]... O ...net exports [variant 3]... ...measured in real terms. a) Describe in detail how inflation affects this component of GDP. What is the name of the effect through which this component is affected by inflation? b) The aggregate-demand curve shifted to the left. Suggest two possible events related to this GDP component that could have contributed to this shift. c) Suggest a policy the government can introduce or eliminate to stimulate aggregate demand through this GDP component. d) On the graph below [excluded]: Label the axes. ● Graph the aggregate-demand curve, the long-run aggregate-supply curve, and the short-run aggregate-supply curve. Make sure you label them. Graph the shift of the aggregate-demand curve to the left and label the new curve. Show what will happen if the government introduces the policy you suggested in part (c). Assume the policy…
Use the following information to answer the next question. C = A + .75(Y – T) A = $900 I = $600 G = $400 T = $400 NX = -$200 If the full-employment level of real GDP is $6,000, at the equilibrium level of real GDP, there is ________. Multiple Choice an inflationary output gap of $100 a recessionary expenditure gap of $400 an inflationary output gap of $400 a recessionary expenditure gap of $100
The long-run aggregate supply curve is Multiple Choice upward-sloping and becomes steeper at output levels above the full-employment output. vertical. horizontal. upward-sloping and becomes flatter at output levels above the full-employment output.
Question 15 Consider Figure 11.2. A shifting from point A to point C (AD1 to AD2) could be due to a (an) Price Level A$1 AS2 Figure 11.2 AD1 AD2 GDP increase in taxes. increase in money supply. decrease in government spending. decrease in confidence.
An increase in labor suppliers' expectations concerning the aggregate price level will cause the Keynesian aggregate supply schedule to shift to the left and the labor supply schedule to shift to the right, reducing the money wage and output. and the labor supply schedule to both shift to the left, raising the money wage and retucing output. and the labor supply schedule to both shift to the right, reducing the money wage and raising output. to shift to the right and the labor supply schedule to shift to the left, raising the money wage and output.
The U.S. macroeconomy is in a short-run equilibrium at Q1 and P1. What is going to happen in the long-run? P Р1 QN Q₁ SRAS1 AD Q This is a diagram with price on the vertical axis and quantity on the horizontal axis. There is a place marked on the horizontal axis with a QN. There is an upward sloping line labelled SRAS and a downward sloping line labelled AD. The place these two lines intersect is labelled Q1 on the horizontal axis and P1 on the vertical axis. Q1 is to the right of QN. O The aggregate demand curve will shift left leading to falling prices and falling output. O SRAS curve will shift left leading to rising output and rising prices. OSRAS curve will shift left leading to rising prices and falling output.
When households cut back on their spending, then in the short run we tend to see the price level ______ and equilibrium output __________. fall; fall rise; fall rise; rise fall; rise
14. Crowding out On the following graph, AD₁ represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply curve. The economy's full-employment output is $12 trillion. On the following graph, use the grey point (star symbol) to mark the equilibrium. (Note: You will not be graded on any adjustments made to the graph.) PRICE LEVEL (CPI) 106 105 104 103 102 101 100 99 98 97 96 6 7 8 1 1 1 11 AS AD₁ Full Employment 9 10 11 REAL GDP (Trillions of dollars) 12 13 14 15 AD₂ AD 3 16 Equilibrium ?