Refer to the Figure B. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely: 1) cause inflation. 2) increase unemployment. 3) lower prices, but leave output unaffected. 4) reduce both prices and output. Figure AFigure BPricePriceP3P2PD3D3P,D2D2Q,QuantityQ, Q2 Q3Quantity

The economies tend to work upon the basis of the working of the forces of aggregate demand, and…

Answered: Refer to the Figure B. Assuming this…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following would cause the dynamic DAD curve to shift in (back)? A) a decrease in consumer confidence. B) a decrease in the inflation rate. C) an increase in consumer wealth. D) an increase in the short-run aggregate supply (SRAS) curve.
Assume our complete 4-panel model of the economy in equilibrium at Y-full employment. If the Fed buys up government securities from the public, macroeconomists predict which one of the following? Group of answer choices a)In the long run there will be some inflation and aggregate output will eventually return to its full employment level. b)The short run aggregate demand curve shifts to the left and the short run aggregate supply curve shifts to the right. c)In the long run there will be some inflation and aggregate output will be permanently pushed above Y-full employment. d)The short run aggregate demand curve shifts to the right and the short run aggregate supply curve shifts to the right.
All of the following are likely results of a positive demand shock EXCEPT Select one: higher inflation. the Phillips curve shifts to the right. a positive output gap. the IS curve shifts to the right.
3. Assume the aggregate demand curve is given by Y 11.5 – 0.6n and the aggregate supply curve by t = 2.5 + 0.6(Y – 8). a. Find the short-run equilibrium level of output and inflation and plot your results in a graph. b. Is the short-run equilibrium you have found in (a) also a long-run equilibrium? If not, how would the self-correcting mechanism ensure that long-run equilibrium is attained? Answer this question with the help of a graph.
Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run. (Hint: Use AD-AS framework)
Using SDM, show the impact of the demand shocks on the equilibrium of the auto market. Graphically show the change in consumers, producers, and total surplus. Notes: label the relevant areas of the graph and show the change in consumers, producers, and total surplus.
If the economy starts at point C and experiences an adverse supply shock, then the LONG-run consequence of that shock will move the economy from a to D to A b. C to D to C c. to B to A d. none of the above
If the central bank sells government securities from the private sector-money markets other things being equal, what would the effect be on the following? a)Aggregate demand b) Aggregate supply c)economic activity d)Inflation e)Unemployment
Macmillan Learning A positive demand shock will result from: a sudden increase in nominal wages. an increase in potential GDP. a move by the Bank of Canada to lower the interest rate. consumers and firms becoming more pessimistic.
Assume an economy that starts with Y = Y₂. Illustrate graphically and explain the impact of a fall in energy prices in the IS-LM-PC model with anchored expectations. Illustrate graphically, explain, and discuss the impact of the fall in energy prices depending on whether the central bank, firms, or workers have the power to adjust the economy to keep inflation at its target rate after the fall in energy prices. ་པཕབ་པ་
Explain why a supply shocks is most of the time believed to be temporary? And does not result in government requiring to do any special policy to rectify the problem.
ANSWER NUMBER 4 ONLY

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