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QUESTION 15 Expenditures, Income 60 50 40 30 20 10 0 80 Price level .88888 70 60 50 30 10 0 0 0 10 20 30 40 50 real GDP=Q 10 20 30 real GDP=Q AS AD Q AE AEo ADO 40 50 Expenditures, Income Price level 60 50 40 30 20 10 0 0 80 70 60 50 40 30 20 10 0 0 10 10 I 20 30 40 50 real GDP=Q AS 20 30 40 real GDP Q AE* AEo AD ADO. 50 5. Which of the following statements is/are true about the diagrams above depicting the macroeconomy in both Keynesian and Classical frameworks and a change from AEo to AE* and ADo to AD*? O(a) The left-hand diagrams show the effect of an increase in Aggregate Expenditures (and Aggregate Demand), where the short-run Aggregate Supply is horizontal, meaning a constant products price level. (b) The right hand diagrams show the effect of an increase in Aggregate Expenditures (and Aggregate Demand), where short-run Aggregate Supply is vertical (constant Aggregate Quantity Supplied). O(c) The left-hand diagrams illustrate the Keynesian range of the short-run Aggregate Supply curve, where Keynesian expansionary policy does not cause any inflation and thus is very effective. O (d) The right-hand diagrams illustrate the Classical or Monetarist range of the short-run Aggregate Supply curve, where Keynesian expansionary policy is totally dissipated in inflation and thus is totally ineffective. O(e) All the above

QUESTION 15 Expenditures, Income 60 50 40 30 20 10 0 80 Price level .88888 70 60 50 30 10 0 0 0 10 20 30 40 50 real GDP=Q 10 20 30 real GDP=Q AS AD Q AE AEo ADO 40 50 Expenditures, Income Price level 60 50 40 30 20 10 0 0 80 70 60 50 40 30 20 10 0 0 10 10 I 20 30 40 50 real GDP=Q AS 20 30 40 real GDP Q AE* AEo AD ADO. 50 5. Which of the following statements is/are true about the diagrams above depicting the macroeconomy in both Keynesian and Classical frameworks and a change from AEo to AE* and ADo to AD*? O(a) The left-hand diagrams show the effect of an increase in Aggregate Expenditures (and Aggregate Demand), where the short-run Aggregate Supply is horizontal, meaning a constant products price level. (b) The right hand diagrams show the effect of an increase in Aggregate Expenditures (and Aggregate Demand), where short-run Aggregate Supply is vertical (constant Aggregate Quantity Supplied). O(c) The left-hand diagrams illustrate the Keynesian range of the short-run Aggregate Supply curve, where Keynesian expansionary policy does not cause any inflation and thus is very effective. O (d) The right-hand diagrams illustrate the Classical or Monetarist range of the short-run Aggregate Supply curve, where Keynesian expansionary policy is totally dissipated in inflation and thus is totally ineffective. O(e) All the above

ENGR.ECONOMIC ANALYSIS
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 15 Analysis #### Diagram Explanation **Top Left Graph**: - **Title**: Expenditures, Income vs. Real GDP (Q) - **Axes**: - Vertical Axis: Expenditures, Income (ranging from 0 to 60) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Black Line: Q - Red Lines: - Lower Line: \( AE_0 \) - Upper Line: \( AE^* \) - **Key Feature**: The two red lines indicate a shift in Aggregate Expenditures. **Top Right Graph**: - **Title**: Expenditures, Income vs. Real GDP (Q) - **Axes**: - Vertical Axis: Expenditures, Income (ranging from 0 to 60) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Same as above with the lines \( AE_0 \) and \( AE^* \) showing a shift. **Bottom Left Graph**: - **Title**: Price Level vs. Real GDP (Q) - **Axes**: - Vertical Axis: Price Level (ranging from 0 to 80) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Blue Line: AS (Aggregate Supply) - Magenta Lines: - Lower Line: \( AD_0 \) (Initial Aggregate Demand) - Upper Line: \( AD^* \) (New Aggregate Demand) - **Key Feature**: This illustrates a shift in Aggregate Demand. **Bottom Right Graph**: - **Title**: Price Level vs. Real GDP (Q) - **Axes**: - Vertical Axis: Price Level (ranging from 0 to 80) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Blue Line: AS (Aggregate Supply) - Magenta Lines: - Lower Line: \( AD_0 \) - Upper Line: \( AD^* \) - **Key Feature**: Similar shift in Aggregate Demand as seen in the previous graph. #### Question Which of the following statements is/are true about the
Transcribed Image Text:### Question 15 Analysis #### Diagram Explanation **Top Left Graph**: - **Title**: Expenditures, Income vs. Real GDP (Q) - **Axes**: - Vertical Axis: Expenditures, Income (ranging from 0 to 60) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Black Line: Q - Red Lines: - Lower Line: \( AE_0 \) - Upper Line: \( AE^* \) - **Key Feature**: The two red lines indicate a shift in Aggregate Expenditures. **Top Right Graph**: - **Title**: Expenditures, Income vs. Real GDP (Q) - **Axes**: - Vertical Axis: Expenditures, Income (ranging from 0 to 60) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Same as above with the lines \( AE_0 \) and \( AE^* \) showing a shift. **Bottom Left Graph**: - **Title**: Price Level vs. Real GDP (Q) - **Axes**: - Vertical Axis: Price Level (ranging from 0 to 80) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Blue Line: AS (Aggregate Supply) - Magenta Lines: - Lower Line: \( AD_0 \) (Initial Aggregate Demand) - Upper Line: \( AD^* \) (New Aggregate Demand) - **Key Feature**: This illustrates a shift in Aggregate Demand. **Bottom Right Graph**: - **Title**: Price Level vs. Real GDP (Q) - **Axes**: - Vertical Axis: Price Level (ranging from 0 to 80) - Horizontal Axis: Real GDP = Q (ranging from 0 to 50) - **Lines**: - Blue Line: AS (Aggregate Supply) - Magenta Lines: - Lower Line: \( AD_0 \) - Upper Line: \( AD^* \) - **Key Feature**: Similar shift in Aggregate Demand as seen in the previous graph. #### Question Which of the following statements is/are true about the
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