YpY₁Real GDP per yearRefer to the above graph. The economy is initially at output level Y₁. A noninterventionpolicy would result in the restoration of potential output by allowingAthe short-run aggregate supply curve to shift to the left.Bthe short-run aggregate supply curve to shift to the right.Cthe aggregate demand curve to shift to the right.Dthe aggregate demand curve to shift to the left. Price levelLRASSRASP3CP₁P₂YpBAAD₁AD₂Real GDP per yearC

When potential output is restored, it means that the economy is operating at its full capacity…

Answered: Yp Y₁ Real GDP per year Refer to the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A decrease in the price level: a b с Price Level (P) d P2 P₁ a bg Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Q₁ Q₂ AD AD* Real GDP (Q) is illustrated by a movement along the AD curve from point a to b, and leads to an increase in aggregate demand. is illustrated by a movement along the AD curve from point a to b, and leads to an increase in the quantity demanded of real GDP. results in a shift of the AD curve to the right, such as going from point b on AD to point g on AD*. results in a shift of the AD curve to the left, such as going from point f on AD* to point a on AD.
Aggregate Demand and Aggregate Supply (AD-AS) Model (Chapter 13) 5.1 Why does the short-run aggregate supply curve slope upward? 5.2 Explain why the long-run aggregate supply curve is vertical. Then, explain how each of the following events would affect the long-run aggregate supply curve. A lower price levels b. A decrease in the labor force A decrease in the quantity of capital goods d. Technological change a. с. 5.3. Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. Explain how the economy moves back to full employment.
Assume the Canadian economy is currently at equilibrium. a. Using a correctly labeled aggregate demand and supply graph, show Full employment output (yf) Current price level (PL1) b. World War III breaks out and Canada has to get involved. The Prime Minister chooses to increase the military budget by 40%. On your graph from part A, show what will happen in the economy, labeling the new equilibrium as Q2, PL2. c. Using a correctly labeled graph of the loanable funds market, show how the Prime Minister’s decision will affect the economy.
Which of the following will increase the Aggregate Demand curve or shift it to the right? The government passes a big infrastructure improvement spending bill O Interest rates rise The raises personal income taxes The U.S. population experiences a significant contraction in population, decreasing the number of people working and consuming. Question 2 Which of the following will decrease the aggregate supply curve or shift it to the left? New international sanctions on Iranian oil raise the price of oil globally and oil is an input in production of many goods and services A 10 percent across the board reduction in personal income tax rates Business taxes fall A new networking technology increases productivity all over the economy
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy 180 LRAS AS 160 140 120 100 80 60 40 AD 20 AD, 100 200 300 400 500 600 700 800 900 Real GDP (billions of dollars) Inctructions: Enter your answers as a whole number. Price Level
Which statements accurately explain the slope of the aggregate-demand curve? (choose all statements that are correct) O The Canadian exchange rate depreciates, so Americans import more wheat from Canada U with a sharp increase in the consumer price Index, there is a surge in demand for durable goods before their prices rise even furt O A rise in the rate of interest on Ahmed's saving account makes him feel wealthier so he invests in a new office computer O When the Euro appreciates against the Canadian dollar, Canadians shift some of their demand for services to imports from Europe O When interest rates fall, Jennifer decides to buy some new farm equipment O with prices down and wages fixed by contract, Rocky's gravel pit decides to lay off workers OJake feels wealthier because of the price drop, so he decides to buy a new pick-up truck
Suppose the economy is initially at K. Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium? Select one: a. Over time, the aggregate demand curve will shift to the right until long-run equilibrium is restored at J and the gap is closed. b. Rising unemployment puts pressure on nominal wages to fall. The SRAS curve shifts right to SRAS1 closing the gap at H. c. In response to rising prices, firms will increase production moving along SRAS2 until long- run equilibrium is restored at J and the gap is closed. d. Rising unemployment puts pressure on nominal wages to fall. Firms employ more workers moving along SRAS2 until long-run equilibrium is restored at J and the gap is closed.
Which of the following would cause a leftward shift of the aggregate demand curve? a decrease in tax rates an expectation of higher national income the economy of a trading partner enjoys a high rate of economic growth an appreciation of the U.S. dollar O a decrease in interest rates
An increase in government spending would affect GDP if ? the long-run aggregate supply is vertical the short-run aggregate supply is vertical the short-run aggregate supply is upward sloping the short-run aggregate supply is horizontal
Which of the following is an assumption of the aggregate demand-aggregate supply model? A. An economy is always at full-employment level in the short run. B. Capital stock cannot be varied in the short run. C. Producers are reluctant to change prices of their products even in the long run. D. Long-run aggregate supply curve slopes upward.
Aggregate demand is more likely to than aggregate supplyl in the short run a- bigger leakages b-national income c-domestic investment d- shift substantually
In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase? Multiple choice a. when the dollar appreciates b. when real wealth rises c. when the interest rate rises d. when the expected price level rises.

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