Prick level (GDP price index, 2005 = 100)The economy is at the equilibrium shown at point a in the figure. If the FedPotentialGDPAS130O A. sells government securities, the economy moves to an equilibrium atpoint b.120O B. buys govemment securities, the economy moves to an equilibrium atpoint c.110C. selis government securities, the economy moves to an equilibrium atpoint c.100O D. buys govermment securities, the economy moves to an equilibrium atpoint b.90O E. None of the above are correct because the economy will remain at point aif the Fed buys or if the Fed sells government securities.13.5Real GDP (trillions of 2005 dollars)11.512.012.5130140

Point a lies to the left of LRAS (potential GDP, so currently economy is in recession. If Fed sells…

Prict level (GDP price index, 200S 100) The economy is at the equilbrium shown at point a in the figure. If the Fed Potential AS 130 GDP O A. sels government securities, the economy moves to an equilibrium at point b. 120 OB. buys govemment securities, the economy moves to an equilbrium at point e. 10 Oc. sells govermment securities, the economy moves to an equilbrium at point c. 100 OD. buys government securities, the economy moves to an equilibrium at point b 90 OE None of the above are correct because the economy will remain at point a if the Fed buys or if the Fed sels government securities. 11.5 12.0 125 130 13.5 140 Real GDP (uilions of 2005 dollars)

Prict level (GDP price index, 200S 100) The economy is at the equilbrium shown at point a in the figure. If the Fed Potential AS 130 GDP O A. sels government securities, the economy moves to an equilibrium at point b. 120 OB. buys govemment securities, the economy moves to an equilbrium at point e. 10 Oc. sells govermment securities, the economy moves to an equilbrium at point c. 100 OD. buys government securities, the economy moves to an equilibrium at point b 90 OE None of the above are correct because the economy will remain at point a if the Fed buys or if the Fed sels government securities. 11.5 12.0 125 130 13.5 140 Real GDP (uilions of 2005 dollars)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 25-4 45 Potential GDP Real GDP In Figure 25-4, which expenditure level will result in a recessionary gap? O There will be no deflationary gap. Real Expenditures
Which of the following is NOT a component of planned aggregate expenditure? Select one: O a. Planned investment O b. Government purchases O c. Transfer payments d. Net exports O e. Consumption
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What takes place when the economy reaches potential GDP and the aggregate supply becomes vertical?. The potential GDP is vertical only the traditional AD-AS model. c, The potential GDP is vertical only in both the income-expenditure model and the traditional AD-AS model. The potential GDP is vertical only in the income-expenditure model.
Figure 34-3 PRICE LEVEL a a a LRAS Y, Y₂ QUANTITY OF OUTPUT SRAS. SRAS. AD Refer to Figure 34-3. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a falling price level and a falling level of output, as the economy moves to point C. falling price level and a rising level of output, as the economy moves to point A. rising price level and a falling level of output, as the economy moves to point A. Orising price level and a rising level of output, as the economy moves to point C.
Homework: Chapter 09 PRICE LEVEL 140 135 130 125 120 115 110 105 100 0 Changes in a Self-Regulating Economy 1 AD2 SRAS AD₁ LRAS 6 2 3 4 5 REAL GDP (Trillions of dollars) 8 Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD; to AD₂. As a classical economist from Langoria, you explain that the shift in aggregate demand creates . You also explain that will be affected in the short run. You note that such a gap leads to an unemployment rate that is to ▼ As wages change, the explain that in the long run, the natural unemployment rate. This means that wages are certain until Real GDP equals Natural Real GDP. Finally, you curve shifts to the will be affected. MacBook Pro X A-Z A+
U.S. durable goods orders boosted by aircraft The Commerce Department reported that orders for durable goods increased 2.1 percent in July. Orders for Boeing aircraft rebounded. Source: Financial Times, August 26, 2019 Explain the process by which an increase in durable goods orders at a constant price level changes equilibrium expenditure and real GDP. A planned increase in durable goods is an increase in planned investment. When planned investment increases, _______. A. the economy moves production into investment from consumption expenditure, government expenditure on goods and services, and exports. Real GDP decreases B. real GDP cannot change unless the price level also changes C. real GDP increases by an amount equal to the change in investment. Disposable income decreases to make up for the increase in investment so that the economy returns to its long-run equilibrium D. real GDP initially increases by an amount equal to the change in…
Figure 25-4 45 Potential GDP Real GDP In Figure 25-4, which expenditure level will cause an inflationary gap? 1 There will be no inflationary gap. 02 Real Expenditures
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2. The graph below shows the AD-AS model in short-run equilibrium at price level Po and level of real GDP at Yo. Label the following: AD, SRAS, LRAS, Po and Yo. P Y A. Is this SR equilibrium a recessionary gap or an inflationary gap? Why is the undesirable? B. Assume Congress and the President decide to act. How would you suggest they alter each of the following (1,↓↓, or no change)? - Taxes - Transfer Payments -Government Spending C. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. D. As the economy moves from Yo to Yp, what happens to the following (1,↓, or no change)? - Real GDP - the unemployment rate - The price level - the rate of inflation
Consider an economy described by the following: a. Derive expressions for the MP curve and the AD curve. The expression for the MP curve is: OA. 7=1.5+0.8. OB. 7=3+0.8 C. r= 1.5+ 1x OD. 7=3+1x. The expression for the AD curve is: O A. Y=14-1.3. OB. Y 17.5-1.3. OC. Y=14-2x. O D. Y=17.5-2. = $3 trillion 7 = $1.3 trillion G = $3.5 trillion T = $3 trillion In order to keep output constant, the Bank will have to NX = S-1 trillion 7 = 1 b. Assume that =2. The real interest rate is %. (Round your response to two decimal places.) The equilibrium level of output is $trillion. (Round your response to two decimal places.) c. Suppose government spending increases to $4 trillion. What happens to equilibrium output? Equilibrium output will to S trillion. (Round your response to two decimal places.) d. If the Bank of Canada wants to keep output constant, then what monetary policy change should it make? mpc = 0.8 d = 0.3 x = 0.1 λ = 1 7 = 1.5 the real interest rate to r= %. (Round your response to two…