Answered: Question 1) a) In panel (a) the curve…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 1)

a) In panel (a) the curve shifts upward, what could cause this?
O Increase in G (govermment spending)
O Decrease in HH wealth due to a decrease in housing prices
O An increase in the overall price level
o Areduction in govemment spending (G)

b) Using Figure 2, if this economy is currently at Y1 and consumer wealth increases, then___
O AD1 will shift to the left, reflecting a decrease in the real GDP at every price level.
O AD1 willshift to the right. reflecting an increase in the real GDP at every price level.
O an upward movement along the AD1 wiltake place., reflecting an increase in the price level.
O a downward movement along the AD1 will take place, reflecting a decrease in the price level.

In Panel (a) the AE curve shifts upward, what could cause this?
Figure 2
Planned aggregate
spending, AEPlanned
(billions of dollars)
$4,000
3,500
3,000
2,400
2.000
1,200
800
Aggregate
price
level
(a) Change in Income-
Expenditure Equilibrium GDP
E₁
$500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
YI
Y
(b) Shift of the AD Curve
E₁
AD₁
AE Panned
AE Planned,
E₂
AD₂
Real GDP
(billions of dollars)
Real GDP

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