Question 6n Firms become more optimistic about the economy and decide to buy more capital goods. This will cause which of the following in the short run? OA) aggregate demand to increase B) aggregate demand to decrease C) short-run aggregate supply to increase D) short-run aggregate supply to decrease
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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 pricesO An increase in the overall price levelo 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.(a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Real GDP Consumption Planned Investment Government Purchases Net Exports $1,000 $1,000 $100 $150 -$50 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4,000 3,700 100 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is not at full employment, by how much should government spending…29) Suppose that from 2017 to 2018, unemployment went from 7.2 to 5.6% and inflation went from 2.17 to 1.1%. An explanation of these changes might be that the O long-run aggregate supply curve shifted to the left. O interest rates increased O consumer spending increased O overnment decreased federal expenditures O price of steel decreased
- 3. Determinants of aggregate demand The graph below is associated with a hypothetical country Consider a decrease in aggregate demand (AD). Specifical aggregate demand shifts to the left from AD, to AD², causing quantity of output demanded to fall at each price level. For instance, at a price level of 140, output is now $200 billion, where initially it was $300 billion. PRICE LEVEL 170 110 100 90 0 100 AD₁ AD₂ 300 400 500 600 700 OUTPUT (Billions of dollars) Interest rates Domestic currency value relative to the foreign currency Consumer expectations about future profitability Government spending 800 The following table lists several determinants of aggregate demand. (?) Fill in the missing values in the table by selecting the change each scenario required to decrease aggregate demand. Change Required to Decrease ADIn 2001, the United States was in recession. Which of the following things would you not expect to have happened? Select one: O increased layoffs and firings a higher rate of bankruptcy O increased claims for unemployment insurance O increased investment spendingA Moving to another question will save this response. Quèstion 1 The table gives aggregate demand and supply schedules for a hypothetical economy. Amount of Real Output Demanded Price Level (Index Amount of Real Output Supplied Value) $ 200 300 $ 500 300 250 450 400 200 400 500 150 300 600 100 200 If the amount of real output demanded at each price level falls by $200, this might have been caused by O A. an increase in consumer wealth. O B. a worsening of business expectations. O C. an increase in net exports. O D. a decrease in the personal income tax. vO thic rock onse
- 8. Suppose that aggregate demand and supply for a hypothetical economy are as shown: P Amount of real Price Amount rea AS GDP level GDP supplie demanded, billions (price index) billions 100 300 450 200 250 400 AD' 300 200 300 AD 400 150 200 500 100 100 Real 100 200 300 400 GDP Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Equilibrium price level = Is the equilibrium real output also necessarily the full-capacity real output? (Yes, No ) The full-capacity level of GDP is more lil cut at $ а. Equilibrium real output = $ billion billion. b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250? billion, (more, less ) than billion. The (shortage, surplus) of real output will drive the At a price level of 150, real GDP supplied is a maximum of $ the real GDP demanded of $ price level up. At a price level of 250,…2. Why the aggregate demand curve slopes downward The graph below shows the aggregate demand (AD) curve a hypothetical economy. At point X, the quantity of output demanded is $500 billion, and the price level is 120. Movin up along the AD curve from point X to point Y, the quantity output demanded falls to $300 billion, and the price level rises to 140. PRICE LEVEL 170 140 130 120 100 90 0 100 200 300 400 500 600 OUTPUT (Billions of dollars) exchange rate As the price level rises, the purchasing power of household real wealth will demanded to 800 effect. causing the quantity of output . This phenomenon is known as the Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dolla in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore and the number of foreign products purchased domestic consumers and firms (imports) will exports will therefore domestic output demanded to…4. Determinants of aggregate demand The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD, to AD,, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion PRICE LEVEL 170 160 130 130 120 110 100 8 0 II 200 100 II II II I I 100 300 400 OUTPUT (Billions of dollars) AD₁ 600 700 800 The following table lists several determinants of aggregate demand. (2)
- 2. Aggregate supply (AS) denotes the relationship between the __________________ that firmschoose to produce and sell and the _________________, holding the price of inputs fixed.(A) total quantity; price level for output (B) type of goods; input price of raw materials(C) price of goods; number of employees (D) total inputs; types of goods4. Determinants of aggregate demand The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD₁ to AD₂, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion. PRICE LEVEL 170 160 150 140 130 120 110 100 90 + 0 100 I 200 I | -+ 1 I I I AD ₂ 2 AD₁ 300 400 500 600 700 800 OUTPUT (Billions of dollars) The following table lists several determinants of aggregate demand. (?) Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand. Change Required to Increase AD Interest rates Domestic currency value relative to the foreign currency Consumer expectations about future profitability Government spending6. Determinants of aggregate supply The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where th currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS, to AS, causing the quantity of output supplied at a price level of 100 to rise fr $200 billion to $250 billion. PRICE LEVEL 200 175 150 125 100 75 50 25 0 50 AS₁ AS Regulations on the firm Human capital Input prices 100 150 200 250 300 350 400 QUANTITY OF OUTPUT (?) The following table lists several determinants of short-run aggregate supply. Complete the table by selecting the changes in each scenari necessary to increase short-run aggregate supply. Change Necessary to Increase AS