Answered: Price level LRAS D A B ய AS AD, AD₂ AD₁… | bartleby

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 4TY

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Price level
LRAS
D
A
B
ய
AS
AD,
AD₂
AD₁
Real GDP
Suppose the economy is currently experiencing an inflationary gap, without any government policy
intervention, the economy would move from
☐ a) C to B
b) B to A
c) A to E
d) E to A
e) C to D

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Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
What is your prediction for the economy when you observe that inventories are taking an unplanned dive? You predict that there will be OA. an expansion O B. a trough O C. a business cycle O D. a recession
Which of the following will NOT shift the ADTT curve? O a. A rise in consumer confidence O b. A rise in interest rates O c. A rise in government spending O d. A rise in exports
Imagine there is a consumption smoother (also known as a PIH consumer) who expectsto live for another 40 years and to work for another 30 years. They just learned thatthey will receive a permanent pay increase from their job of $800. How much extra dothey consume this year? What is their marginal propensity to consume?
Congratulationst You have been appointed an economic policy adviser to the United States, You are told that the economy is significantly abowe futtemplyoment GDP. Based on this inlormation, how can the economy would adjust to reach LR.SR Equilbrium (Classical View)? The economy wilt experience low unemployment rate, pushing wages up, and increasing the pelces of a key input (labor). shatting the sAS to the left (up). The economy will experience high unemployment rate, pushing wages down, and reducing the prices of a key input (labor). shiting the SAS to the right (down). The econoriny wil experience low unemployment rate, decreasing inceme, which will eventually shift the AD to the left. The eooncmy will experience low unemployment rate, pushing wages up, and increasing the prices of a key input (labor), shiting the sAs to the night (down).
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. (a) An increase in government expenditure in infrastructureClick or tap here to enter text.(b) A severe recession occurs in a country, which has been a major importer of thenation’s exports.Click or tap here to enter text.(c) The federal government increases business taxesClick or tap here to enter text.(d) The Central Bank increases the cash interest rate
Which of the following will NOT shift the ADT curve? O a. A rise in government spending O b. A rise in exports Ос. A rise in interest rates O d. A rise in consumer confidence
E2
Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
If the economy is operating in the neoclassical zone of the SRAS curve and aggregate demand falls, what is likely to happen to teal GDP?
Do neoclassical economists believe in Keynes law or Says law?

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