Suppose the unemployment rate is 5% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect to be associated with the lower unemployment rate (3%). If aggregate demand is low in 2028, and the economy is at outcome A, the inflation rate between 2027 and 2028 is
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- In the year 2027, aggregate demand and aggregate supply in the imaginary country of Patagonia are represented by the curves AD2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled ADA curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled ADB, resulting in the outcome given by point B. PRICE LEVEL 108 107 106 105 104 103 102 101 100 0 AD 2027 2 4 I B AS 10 6 8 OUTPUT (Trillions of dollars) AD B 12 14 16 ?The table below shows information on aggregate supply, aggregate demand and the price level for the imaginary country of Xurbia. Price Level AD AS 110 700 600 120 690 640 130 680 680 140 670 720 150 660 740 160 650 760 170 640 770 Plot the AD/AS diagram from the data shown (Don't have to show graph but do draw it to help you answer the questions). a. Identify the equilibrium. b. Imagine that as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium. c. How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?In the year 2020, aggregate demand and aggregate supply in the fictional country of Drooble are represented by the curves AD2020AD2020 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2021. The first potential aggregate demand curve is given by the ADAADA curve, resulting in the outcome illustrated by point A. The second potential aggregate demand curve is given by the ADBADB curve, resulting in the outcome illus- trated by point B. PRICE LEVEL 108 107 106 105 104 103 102 101 100 0 AD 2020 2 ■ 4 B AS 6 8 10 OUTPUT (Trillions of dollars) ADA ADB 12 14 16 ? Suppose the unemployment rate is 6% under one of these two outcomes and 5% under the other. Based on the previous graph, you would expect to be associated with the higher unemployment rate (6%). If aggregate demand is low in 2021, and the economy is at outcome A, the inflation rate between 2020 and 2021 is Based on your answers to the previous questions, on the following graph use…
- As you know, supply and demand shifts are caused by one of their determinants. Shifts in aggregate demand (AD) show the effect of events on price level and Real GDP. Any event that causes a change in consumer, business, or government spending or any change in net exports (C+l+G+Xn) will shift AD. Any event that causes a change in production costs or increases productivity will shift aggregate supply (AS). Decide if the following events are Micro, shifting supply or demand, or Macro, shifting AD or AS. Give the direction in which the graph shifts. Demand Situation Aggregate Supply Aggregate Demand Supply Sales of Atlanta Braves gear grows with the success of the team. 1. The President and Congress pass a trillion dollar stimulus bill to provide aid during recession. 2. 3. Salmonella outbreak in peanut processing plants threatens lunches for school children. 4. Pomegranates are shown to be cancer fighting superfoods. Value of U.S. dollars declines, exports increase. 5. Global oil prices…The following graph shows an increase in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the right from AD1 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, where previously it was $300 billion. 170 160 150 140 - 130 AD2 120 110 AD, 100 90 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars) The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to increase aggregate demand. Change Needed to Increase AD Wealth Taxes Interest rates The value of the domestic currency relative to the foreign currency PRICE LEVELThe outbreak of COVID-19 adversely attacks most economies. Some economists e/2 argue that the impacts on the macroeconomy mainly come from (i) the reduction in consumption and investment appetite, while others believe that the impacts mainly come from (ii) the immediate destruction of the supply-chain and production. Suppose two quarters since the outbreak of the COVID-19, changes in selected macroeconomic data of Country X can be summarized as below: Last year This year Annualized economic growth rate 4% -6% Unemployment rate 5% 8% Inflation rate 2% 5% Using an AD-AS model, explain whether argument (i) or (ii) above fits better to а. the case of Country X. b. Given your answer in (a), briefly discuss one plausible short-run dilemma facing the central bank of Country X.
- The graph below is associated with a hypothetical country. Consider a decrease in aggregate demand (AD). Specifically, aggregate demand shifts to the left from AD to AD₂, causing the 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 170 160 150 140 130 120 110 100 8 90 0 100 AD₁ AD₂ 200 300 400 500 600 OUTPUT (Billions of dollars): 700 800 ?The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, 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. 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 Expected rate of return on investment. (decrease/increase) Incomes in other countries (decrease/increase) Consumer expectations about future profitability. (improve/worsen) Government spending (increase/decrease)Discuss the following questions in 1 paragraph each: Why/how has Covid-19 led to a global economic recession? While the originating place of Covid-19 was China, why do you think Western countries have experienced a sharper economic recession than China? As per the definition(s) of recession that we discussed in Chapter 13 of the Econoomy from CORE, do you think Afghanistan is currently in a recession?
- The graph below shows the AD-AS diagram for Spain. Suppose that the economy is initially in long-run equilibrium with the price level of 900. Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green). 1200 AD 1100 1000 Price Level ADS 900- 800 79R ST 600* 500 400 300 200- 100- LRAS 100 200 300 400 500 600 700 800 900 1000 1100 120 Real GDP Q 1. What is the new GDP in the short-run as a result of this shift? I 2. What is the new price level in the short-run as a result of this shift? 3. What is the price new long-run equilibrium as a result of this shift? 4. What is GDP in the new long-run equilibrium as a result of this shift? 5. What causes the economy to move from the short-run equilibrium to the new long-run equilibrium? O Decreased wages. O increased wages. O Increased prices. O Decreased prices.Suppose the economy of the hypothetical country “X” is currently in equilibrium at point A on thegraph. There were two major shocks to the economy in 2020.First shock was related to oil prices; the other was related to consumer confidence about futurebusiness conditions. Oil Shock: The economy X faced a rise in the average price of oil along with the rise of world price ofoil.E) Would an increase in oil prices cause a demand shock or a supply shock? Redraw the diagram toillustrate the effect of this shock by shifting the appropriate curve. What happens to theAggregate output and price level after the shock? (3)F) If policymakers wish to prevent the equilibrium output from changing in response to the oilprice increase, should they use contractionary or expansionary fiscal policy? (Redraw the graphfrom part E and show the change) (4)G) Even if the economy moves back to original Aggregate output, will there be any drawback? (1)Consumer Confidence Index: The Consumer Confidence Index…Consider a fictional price index, the Canadian Student Price Index (CSPI), based on a typical university student's annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017. Perform these same calculations for 2018 and 2019, and enter the results in the following table. 2017 Notebooks Calculators Large coffees Energy drinks Textbooks Total cost Price index Quantity in Basket 10 1 200 100 10 Price (Dollars) 2 50 1 2 100 Suppose the base year for this price index is 2017. Cost (Dollars) 20 50 200 200 1,000 Between 2017 and 2018, the CSPI increased by 1,470 100 Price (Dollars) 1 54 1 3 120 2018 Cost (Dollars) In the last row of the table, calculate and enter the value of the CSPI for the remaining years. Price (Dollars) 3 75 1 4 150 %. Between 2018 and 2019, the CSPI increased by 2019 Professors…