Suppose the central bank decides to increase money supply (M) in an economy during "normal" times (i.e., without a crisis). Which of the following best describes the short-run effect of this policy in a closed economy? O a. There will be a rightward movement along the aggregate demand curve in the P-Y space due to higher interest rates driving investment. O b. There will be a rightward movement along the aggregate demand curve in the P-Y space due to lower interest rates driving investment. O c. Aggregate demand will shift to the right in the P-Y space due to higher interest rates driving investment. O d. Aggregate demand will shift to the right in the P-Y space due to lower interest rates driving investment.

Suppose the central bank decides to increase money supply (M) in an economy during "normal" times (i.e., without a crisis). Which of the following best describes the short-run effect of this policy in a closed economy? O a. There will be a rightward movement along the aggregate demand curve in the P-Y space due to higher interest rates driving investment. O b. There will be a rightward movement along the aggregate demand curve in the P-Y space due to lower interest rates driving investment. O c. Aggregate demand will shift to the right in the P-Y space due to higher interest rates driving investment. O d. Aggregate demand will shift to the right in the P-Y space due to lower interest rates driving investment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3
Think of the AD-AS model with an upward-sloping AS curve. Suppose the economy is initially at its long-run equilibrium. What is the impact of an unexpected increase in money supply in the short run and in the long run? O a. In the short run, output rises above its natural level. In the long run, output returns to its natural level and the price level is higher than what it was initially. O b. In the short run, output falls below its natural level. In the long run, output returns to its natural level and the price level is higher than what it was initially. O c. In the short run, output rises above its natural level. In the long run, output returns to its natural level and the price level is lower than what it was initially. O d. In the short run, output falls below its natural level. In the long run, output returns to its natural level and the price level is lower than what it was initially.
Arrange these statements in sequence to explain why the short run aggregate supply (SR AS) curve slopes upward. Suppositions as a starting point Conclusion as to why the SR AS curve slopes upward Answer Bank At the macroeconomic level, the increase in aggregate demand (AD) corresponds to a shift in the firms' demand curve, whereas the firms'supply curve remains fixed. Since customers are demanding more of the firms'product, the firms' demand curves increase, which increases prices and output. The firms'willingness to supply more output at a higher price at a micro level shows a positive relationship, which is then also reflected at the macro level with an upward sloping SR AS curve.
In the graph of Figure I, the annual growth rate of the GDP of the United States economy is presented since the first quarter of 2004, while, in the graphs of Figure II, three different scenarios of the relationship are represented between demand and aggregate supply that reflect different situations of economic growth.2. Explain in detail what is happening in Graph A of Figure II (economic growth, expansion, inflation or reccesion) according to the long and short term aggregate supply curve and aggregate demand and general price level and, examining the data in the graph of Figure I Table 1.1.1., and identify in what period of time this situation (identified in the Graph A) is ocurring. Figure I = Real data of the United States economyFigure 2 = Representation of the aggregate demand and supply modelDA = AGGREGATE DEMANDGDP = GROSS DOMESTIC PRODUCTNGP = GENERAL PRICE LEVELOAL = LONG TERM AGGREGATE OFFEROAC = SHORT-TERM AGGREGATE OFFER
A country's economy is close to full employment. The government then decides to launch a tax cut program. Simultaneously, the central bank launches a bond sale program of the same magnitude. What can we say about the country's aggregate product (Y), price level (P) and interest rate (i) in the short run? We can expect Y to increase, P to increase, and i to increase. O b. We can expect Y to remain unchanged, P to remain unchanged, and i to increase. O c. We can expect Y to remain unchanged, P to remain unchanged, and i to remain unchanged. Od. We can expect Y to decrease, P to decrease, and i to decrease. Oe. None of the alternatives is correct.
es Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. a. Demonstrate how the firm will respond to a negative demand shock. Assume prices are flexible. Instructions: Use the tool provided, 'S Flexible Prices', to draw the supply curve when prices are flexible. Then use the tool provided, 'D Negative Shock', to illustrate the shift in the aggregate demand curve when there is a negative demand shock. Computer Market Price $1,200 900 Computers per week Demand Tools S Flexible Pric D Negative Sh O
A Moving to another question will save this response. Question 21 An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve. O A. true. O B. false. A Moving to another question will save this response.
What do you expect will happen to the price level and real GDP in the short run when the bank of Canada buys domestic government bonds given a positively sloped SRAS curve? Select one: O a. Both the price level and real GDP will cross out increase. O b. Both the price level and real GDP will decrease. cross out O c. The price level will increase while real GDP cross out will decrease. O d. The price level will decrease while real GDP cross out will increase. O e. There is no change either to the price level or cross out the real GDP
In the AS/AD Model, a decrease in the financial friction will Select one: O a. Shift the aggregate demand curve to the right. Ob. O b. Shift the aggregate supply curve to the left. Shift the aggregate supply curve to the right. O c. O d. Shift the aggregate demand curve to the left.
Which of the following are true about the imperfect information model of the upward-sloping short-run aggregate supply curve? (i) It assumes imperfect competition among firms. (ii) Producers presume that the relative price of their goods increase whenever overall prices increase. (iii) It is costly to monitor the prices of all goods, so producers make do by observing chiefly the prices of their own goods. O a. (i), (ii), and (iii) O b. Only (ii) and (iii) O c. Only (i) and (iii) O d. Only (i) and (ii)
How would I do c and d?
In the figure, as the price level increases the aggregate demand curve will Price level (GDP price index, 2012 = 100) A. not shift. O B. not shift, but the aggregate demand curve will change so that it is positively sloped. O C. shift from AD, to AD, O D. shift from AD, to AD, and then back to AD,. E. shift from AD, to AD3. AD2 AD3 AD1 Real GDP (trillions of 2012 dollars)