Q11210810410001020304050607080OUTPUT (Billions of dollars)Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs morequickly. The policy will cause the natural rate of unemployment towhich will:O Shift the long-run aggregate supply curve to the leftO Shift the long-run aggregate supply curve to the rightO Not affect the long-run aggregate supply curveIn the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve.Direction of LRAS Curve ShiftMany workers leave to pursue more lucrative careers in foreign economies.A scientific breakthrough significantly increases food production per acre of farmland.A natural disaster destroys a significant amount of the economy's production facilities. Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which ofthe following? Check all that apply.O The size of the labor forceO The level of technological knowledgeThe price levelThe inflation rateSuppose the economy produces real GDP of $40 billion when unemployment is at its natural rate.Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph.132128LRAS124120116Q112 +PRICE LEVEL

In the long run output is produced at the natural rate of output.

Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force The level of technological knowledge O The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL

Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force The level of technological knowledge O The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The economic response to the overnight reduction in the French money supply by 20 percent in 1724: confirmed the quantity theory by leading to an immediate 20 percent reduction in the price level. O confirmed the neutrality of money because no real variables were affected by this nominal change. confirmed that money is not neutral in the short run because both output and prices dropped. contradicted Okun's law because decreases in output were not associated with increases in unemployment.
Refer to the table below. Real Output Real Output Demanded, Original, Supplied, Billions Price Level Billions $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 in aggregate demand? billion c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it? |(Click to select) ♥
4. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups. a homeowner with a fixed-rate mortgage. a union worker with a fixed labor contract a company that has invested some of its endowment in a government bonds which pay a fixed rate of return. 5. Indicate how each of the following events would affect the aggregate demand AD curve: a short-run decrease in the price level an increase in consumer confidence on the price level and real GDP an increase in government purchases
Consider the components of AD for the following economy: (1) consumption = $600 billion; (2) investment = $60 billion; (3) government purchases = $120 billion; and (4) net export = $25 billion. If the full-employment level of GDP for this economy is $705 billion, then what combination of actions would be most consistent with the goal of achieving price level stability? Increase government spending and decrease taxes O Decrease government spending and increase taxes Increase government spending and taxes O Decrease government spending and taxes
The misperceptions theory concludes that: O A. in the short run, unanticipated monetary changes are neutral but anticipated monetary changes are not neutral, B. in the short run, both anticipated and unanticipated monetary changes are not neutral. Oc. unanticipated monetary changes are not neutral in either the short run or the long run. O D. in the short run, anticipated monetary changes are neutral but unanticipated monetary changes are not neutral.
Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. Price Level LRAS Aggregate Supply Aggregate Demand Quantity of Output Now adjust the graph to show the new long-run equilibrium. Aggregate Demand € Aggregate Supply What causes the economy to move from its short-run equilibrium to its long-run equilibrium? The government increases spending to increase aggregate demand. Nominal wages, prices, and perceptions adjust downward to this new price level. O The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust upward to this new price level.
According to Friedman, in which of the following situations is the economy in long-run equilibrium? a. The expected economic growth rate is 3 percent and the actual inflation rate is 3 percent. b. The average inflation rate over the past five years is 2 percent and the expected inflation rate is 2 percent. c. The expected inflation rate is 3 percent and the actual inflation rate is 3 percent. d. The expected economic growth rate is 2 percent and the expected inflation rate is 2 percent.
e. Again, suppose the economy is initially at a long-run equilibrium and that the Fed then increases the money supply. In the following three diagrams, assume the resulting inflation is expected. Show the long-run equilibrium by shifting the appropriate curve or curves and/or placing the point for long-run equilibrium in its appropriate place. IS-LM Model Long-run equilibrium LM IS Income, Output, Y Interest Rate, r
1-)What is the difference between a real rate and a nominal rate? Say you got a raise of 10% of your salary but inflation increased by 15%, what is your real percent increase in salary? How should we use this in every day life to make changes that will make us wealthier over time. 2-) How can we use the Aggregate Supply and Demand Model to help us understand what the government is doing in the current Covid19 economic crisis? 3-) What is the basic difference between Fiscal and Monetary Policy, how are they used during recessions? 4-)
Now, suppose the economy is back in long-run equilibrium, and then the price of imported oil rises. On the following graph, shift a curve or adjust the point to reflect the short-run effect of the increase in the price of oil. nflation Rate L SRPC LRPC O True O False Unemployment Rate SRPC O Short-Run Effect LRPC True or False: If the Fed undertakes expansionary monetary policy, it can return the economy to its original inflation rate but the unemployment rate will be higher. (?)
A common cause of falling inflation is O Weaker growth in demand than in supply for large parts of the economy O High fees and taxes O Strong wage development O Low interest rates and rising investment
Suppose the economy is initially at a long-run equilibrium. The Fed then increases the money supply. In the following three diagrams, assume the resulting inflation is unexpected.