Refer to the table below. Real Output Demanded, Original, Real Output Supplied, Billions Billions Price Level $504 108 $515 507 104 512 510 100 510 513 96 507 516 92 500 Suppose that aggregate demand increases such that the amount of real output demanded rises by $11 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? percent Will this inflation be demand-pull inflation, or will it be cost-push inflation? (Click to select) b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change aggregate demand? 24 billion c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase governmer spending or decrease it? |(Click to select) ♥

Refer to the table below. Real Output Demanded, Original, Real Output Supplied, Billions Billions Price Level $504 108 $515 507 104 512 510 100 510 513 96 507 516 92 500 Suppose that aggregate demand increases such that the amount of real output demanded rises by $11 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? percent Will this inflation be demand-pull inflation, or will it be cost-push inflation? (Click to select) b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change aggregate demand? 24 billion c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase governmer spending or decrease it? |(Click to select) ♥

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 12P

See similar textbooks

Similar questions

How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?
Refer to the table below. Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 Instructions: Enter your anwers as whole numbers. A). What is the equilibrium level of output? What is the equilibrium price level? B). Suppose that aggregate demand increases such that the amount of real output demanded rises by $ 7 billion at each price level. Insert the new values for real output demanded in the table below. Real Output Demanded, Billions New Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 What is the new equilibrium level of output? What is the new equilibrium price level? By what percentage will the price level increase? Will this inflation be demand-pull inflation or will it be cost-push inflation? C) If potential real GDP ( that is, full-employment GDP) is $ 510…
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $4 trillion. The curves are labeled a, b, c, and d. Three points on the graph are also indicated by grey stars and labeled X, Y, and Z. PRICE LEVEL AD 160 150 140 130 120 LRAS 110 B 100 90 80 0 Description с 1 d X 2 3 6 4 5 REAL GDP (Trillions of dollars) SRAS if the expected price level is 120 Identify which curve on the previous graph corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose Not Shown. In the descriptions, AD represents aggregate demand; SRAS represents short-run aggregate supply; LRAS represents long-run aggregate supply. SRAS if the expected price level is 140 SRAS if the expected price level is 110 a O O O O O b 7 O O O с b O O 8 d O O O O O Not Shown ? O O O O O Suppose the economy is currently in short-run equilibrium at point Z. In this case, the economy is producing at an output level…
You are hired by the Council of Economic Advisors (CEA) as an economic consultant.The chairperson of the CEA tells you that she believes the current unemployment rate istoo high. The unemployment rate can be reduced if aggregate output increases. She wantsto know what policy to pursue to increase aggregate output by 300 billion TL. The bestestimate she has for the MPC is 0.8. Which of the following policies should yourecommend?a) Increase government purchases by 75 billion TL.b) Reduce taxes by 75 billion TL.c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL.d) Reduce the budget deficit by 300 billion TL
Real GDP Real GDPDemanded, Price Level Supplied,Billions (Price Index) Billions$100 300 $450200 250 400300 200 300400 150 200500 100 100 Use these sets of data to graph the aggregate demandand aggregate supply curves. What is the equilibriumprice level and the equilibrium level of real output inthis hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output?Explain.b. Why will a price level of 150 not be an equilibriumprice level in this economy? Why not 250?c. Suppose that buyers desire to purchase $200 billion ofextra real output at each price level. Sketch in the newaggregate demand curve as AD1. What factors mightcause this change in aggregate demand? What is thenew equilibrium price level and level of real output?
What effects would each of the following have on aggregate demandor aggregate supply, other things equal? In each case explain the expectedeffects on the equilibrium price level and the level of real output, assumingthat the price level is flexible both upward and downward. · A reduction in interest rates at each price level.· A major increase in spending for health care by the Federalgovernment.· A 10 percent across-the-board reduction in personal income taxrates.· A sizable increase in labor productivity (with no change innominal wages).· An increase in exports that exceeds an increase in imports (notdue to tariffs).
The figure given below shows the aggregate demand and supply curves for the U.S. According to the figure, from the beginning of period I to the end of period 2, Figure 5.1 Price level Price level Potentisloutput Petential output AS 4 2. AD AD Real CDP Real GDP 6,000 10,000 (Period 1) 6,000 10,000 (Period 2) Select one: O a real GDP fell from $10,000 to $6,000 O b. the inflation rate fell from 4 percent to 2 percent O c real GDP remained constant at $6,000 O d. real GDP decreased and then increased O e real GDP increased and then decreased
The following graph shows an increase in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the right from AD¡ to AD2, causing the quantity of output demanded to rise at all price levels. For example, at a price level of 140, output is now $400 billion, wwhere previously it was $300 billion. 170 100 150 140 130 120 AD2 110 AD, 100 00 + 100 200 300 400 500 00 700 800 OUTPUT (Billions of dollars) The following table lists several determinants of aggregate demand. Complete the table by indicating the change needed in each determinant to increase aggregate demand. Change Needed to Increase AD Wealth Тахes Expected rate of return on investment Incomes in other countries PRICE LEVEL
The economy has shifted and the quantity of the real GDP supplied has increased. What has potentially happened to aggregate price levels? Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. O Potentially the price levels have decreased to a lower aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have fired some employees as labor has become too expensive.
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,…
130 120 SAS 110 A 100 AD 90 15.0 15.5 16.0 16.5 17.0 17.5 Real GDP (trillions of 2009 dollars) In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $15.0 trillion, then it must be the case tha aggregate supply has increased. aggregate supply has decreased. aggregate demand has increased. O aggregate demand has decreased Price level (GDP deflator, 2009-100)