1. The equation of exchangeThe equation of exchange is given by MxV = Px Q, where M is the money supply, V is the velocity of money, P is the economy's price level,and Q is Real GDP.Suppose the following diagram shows the current aggregate demand (AD) and aggregate supply (AS) curves in a hypothetical economy.PRICE LEVEL1210200What is the GDP of this economy?O $36 trillionO $24 trillionO $18 trillionO $30 trillionO $37.5 trillionO $15 trillion234REAL GDP (Trillions of dollars)O $60 trillionASO $45 trillionIf the velocity of money is 2, the money supply in this economy isADBecausemoney supply. This illustrates the56ADAdjust the previous graph to show the effects of an increase in the money supply.Based on the new price level, what must the new money supply be in the long run if the velocity of money remains at 2?0AS(?)the percentage increase in the price level is"the percentage increase in the

The quantity theory of money:MV = PYWhere M is the money supplyV is the velocity of moneyP is the…

The equation of exchange is given by MxV=PxQ, where M is the money supply, V is the velocity of money, P is the economy's price level, and Q is Real GDP. Suppose the following diagram shows the current aggregate demand (AD) and aggregate supply (AS) curves in a hypothetical economy. PRICE LEVEL 12 10 8 2 0 0 1 What is the GDP of this economy? O $36 trillion O $24 trillion O $18 trillion O $30 trillion 2 3 REAL GDP (Trillions of dollars) O $37.5 trillion O $15 trillion If the velocity of money is 2, the money supply in this economy is O $60 trillion O $45 trillion AD 5 Because money supply. This illustrates the 6 Adjust the previous graph to show the effects of an increase in the money supply. Based on the new price level, what must the new money supply be in the long run if the velocity of money remains at 2? þ 2 þ 2 (?) I the percentage increase in the price level is the percentage increase in the

The equation of exchange is given by MxV=PxQ, where M is the money supply, V is the velocity of money, P is the economy's price level, and Q is Real GDP. Suppose the following diagram shows the current aggregate demand (AD) and aggregate supply (AS) curves in a hypothetical economy. PRICE LEVEL 12 10 8 2 0 0 1 What is the GDP of this economy? O $36 trillion O $24 trillion O $18 trillion O $30 trillion 2 3 REAL GDP (Trillions of dollars) O $37.5 trillion O $15 trillion If the velocity of money is 2, the money supply in this economy is O $60 trillion O $45 trillion AD 5 Because money supply. This illustrates the 6 Adjust the previous graph to show the effects of an increase in the money supply. Based on the new price level, what must the new money supply be in the long run if the velocity of money remains at 2? þ 2 þ 2 (?) I the percentage increase in the price level is the percentage increase in the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. A change in autonomous spending results to a shift of the LM curve either to the left or right. O a. False; movement along the IS curve O b. False; movement along the LM curve O c. True O d. False; shift of the IS curve 2. Which of the following statements is true? 3. O a. The goods and money markets can never be in equilibrium. O b. The goods and money markets are in equilibrium at the points where the money market is in equilibrium. O c. The goods and money markets are in equilibrium at their point of intersection only. O d. The goods and money markets are in equilibrium at the points where the goods market is in equilibrium. Which of the following describes the steepest investment schedule? O a. 1-450-8(3) O b. 1=450-2(3) O c. 1=450-9(3) O d. 1=450-5(3)
4. Deriving net exports By definition, net exports from Japan are equal to exports from Japan minus imports into Japan. In a hypotheticall two-country world, imports into Japan are equal to exports from the United States. So the value for net exports from Japan is equal to exports from Japani minus exports from the United States, Graphically, at each exchange rate, the value for net exports is the horizontal distance from U.S. exports to Japanese exports. Use the graph input tool to answer the following questions. You will not be graded on any changes you make to this graph. (Note: To avoid dealing with decimal places, this calculator reports the price of yen in terms of dollars per 1,000 yen. That is, the price on the vertical axis is the dollar price of a 1,000-yen note instead of a single yen. As you have already seen, a price of 8 dollars per 1,000 yen is the same as 125 yen per dollar. Once you enter a value in a white field, the graph and any corresponding amounts in each grey…
Price Level 8 7 6 X 50 4 3 2 1 0 2 4 AS AD 6 8 10 12 14 16 18 20 Real GDP (in billions of dollars per year) billion. QE Instructions: Enter your responses as a whole number. a. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ Suppose that full-employment GDP is $13 billion. b. The real GDP gap is $ c. Aggregate demand must shift (left or right) by $ billion. billion to achieve the full-employment equilibrium.
P₁ P₁ 0 X3 Q3 X₁ X₂ Qp Real Output Graph A AS, Q₂ P₂ P₁ P3 X3 ASLR Y₁ X1 Z₁ Qp Real Output Graph B AS₂ AS, AS, In Graph A above, an increase in the price level from P₁ to P2 will lead to: O Higher product prices, a rise in profits and a fall in the unemployment rate O Lower product prices, a decline in profits, and a fall in the unemployment rate O Higher product prices, a rise in profits, and a rise in the unemployment rate O Lower product prices, a decline in profits, and a rise in the unemployment rate
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
You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible What is the effect on the foreign exchangemarket (the $ market)? 8. The exchange rate (the amount of foreigncurrency that a $ buys)?A. increaseB. decreaseC. remains unchanged 9. The U.S. dollar has?A. depreciatedB. appreciatedC. remained unchanged 10. The currency in the other country has?A. depreciatedB. appreciatedC. remained unchanged