The following graph shows aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy.PRICE LEVEL (CPI)1401351301251201151101051009590200 220240ASAD260 280 300 320 340REAL GDP (Billions of dollars)360 380 400AD₂New Macro Eq?Suppose the full employment output level in this economy is $300 billion. In order to move the economy to full-employment output at the lowestpossible price level, the aggregate demand curve must shift to thebyat each price level. Use the green line (triangle symbols) to show the shift in aggregate demand necessary to return the economy to full employment. Then use the purpledrop lines (diamond symbol) to show the macroeconomic equilibrium at full-employment output. Be sure the new aggregate demand curve (AD2) isparallel to AD₁. You can click on AD₁ to see its slope.Suppose the government in this economy wants to enact fiscal policies that will shift the aggregate demand curve in the direction and magnitude youindicated. The marginal propensity to consume (MPC) in this economy is 0.5. This implies a spending multiplier of and a tax multiplier ofConsider each fiscal policy listed here. Which policies would shift the aggregate demand curve in a way that restores full-employment output at thelowest possible price level? Check all that apply.00000Increase government expenditures by $40 billionIncrease government expenditures by $80 billion and raise taxes by $80 billionIncrease government expenditures by $60 billion and raise taxes by $40 billionIncrease taxes by $80 billionDecrease taxes by $100 billion and decrease government expenditures by $20 billion

Full employment is the condition where all people who are available and searching for work can find…

The following graph shows aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy. PRICE LEVEL (CPI) 140 135 130 125 120 115 110 105 100 95 90 200 220 240 AS AD 260 280 300 320 340 REAL GDP (Billions of dollars) 360 380 400 AD 2 New Macro Eq ? Suppose the full employment output level in this economy is $300 billion. In order to move the economy to full-employment output at the lowest possible price level, the aggregate demand curve must shift to the by at each price level.

The following graph shows aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy. PRICE LEVEL (CPI) 140 135 130 125 120 115 110 105 100 95 90 200 220 240 AS AD 260 280 300 320 340 REAL GDP (Billions of dollars) 360 380 400 AD 2 New Macro Eq ? Suppose the full employment output level in this economy is $300 billion. In order to move the economy to full-employment output at the lowest possible price level, the aggregate demand curve must shift to the by at each price level.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Complete the following table by filling in the blanks. (Hint: In the table, Q Real GDP and QN Natural Real GDP.)State of the Economy QQN QQNIs the Economy in a Recessionary Gap, Inflationary Gap, or Long- Run Equilibrium?Does Equilibrium, a Shortage, or a Surplus Exist in the Labor Market?Will Wages Fall, Rise, or Remain Unchanged?Will the SRAS Curve Shift Right, Left, or Remain Unchanged?Is the Economy Above, Below, or on Its Institutional PPF?QQN
Suppose the economy produces real GDP of $50 billion when unemplo plot the economy's long-run aggregate supply (LRAS) curve. PRICE LEVEL 132 128 124 120 116 112 108 104 100 0 10 20 30 40 50 REAL GDP (Billions of dollars) 60 70 80
Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph: The lower-than-expected price level causes firms to earn more profit than they expected on each unit of output they produce, and, therefore, they decrease their production level. At the same time, the real value of wages and other resource prices are lower than workers and firms expected when they signed long-term contracts. As a result, the economy as a whole produces at a level below the unemployment rate is lower than its natural rate. its potential output, and Now, suppose prices remain lower than expected. As a result, in the next round of labor negotiations, unions accept lower wages for their members. The following graph shows the potential output for this economy as well as the same initial short-run aggregate supply curve as in the first graph. Shift one or both of these lines to illustrate how the economy adjusts to a new long-run equilibrium. PRICE LEVEL 180 SRAS 150…
Price Level a b c AS AD AD₁ Real GDP Refer to the figure above. If the aggregate supply curve shifted from ASo to AS₁, we could say that: aggregate supply has increased, and the equilibrium price level has risen to Og aggregate supply has decreased, equilibrium real output has increased, and the equilibrium price level has decreased aggregate supply has decreased, equilibrium real output has decreased, and the equilibrium price level has increased aggregate supply has increased, equilibrium real output has decreased, and the equilibrium price level has increased an increase in the amount of real output supplied has occurred
Which of the following would NOT cause a shift in AD? Select one: a. A reduction in interest rates b. A fall in the cost of production c. A reduction in income tax d. An increase in government spending
The figure below is a part of the AD-AS model as a description of the current situation of an economy. PA=$10 P YA=4000 Y a) Find the short-run equilibrium (i.e. the real output and the price level thereof) of this economy. b) If the natural level of output is 3500, which one will be higher, the unemployment rate at point A, or the natural unemployment rate? Explain. c) Give two reasons as to why the short-run aggregate supply is upward sloping. d) Suppose the government takes no action about the situation indicated above. Explain, with the help of a figure properly labeled, what will happen in this economy in the long run. e) Describe the two kinds of macroeconomic policies that can be used in the situation described before part c). Indicate clearly in your description whether each policy is to the aggregate demand or aggregate supply or Further, give reason(s) as to why the government may want to use these policies rather than doing nothing.
The following graph shows an economy's short-run aggregate supply curve (SRAS), current equilibrium aggregate price level (P₁), and real GDP ( 21). The economy currently has Natural Real GDP (QN) of $6 trillion. Use this information to place the orange long-run aggregate supply curve (LRAS, square symbols) in the correct position on the graph. PRICE LEVEL 10 8 1 A 2 0 0 2 A₁ 4 6 Q₁ REAL GDP (Trillions of dollars) 8 SRAS 10 The equilibrium A₁, shown on the graph, reveals that real GDP (2₁) is shifting SRAS O LRAS Natural Real GDP. As a result, wages will over time,
The following graph shows the new Keynesian aggregate supply (AS) curve for a hypothetical economy. PRICE LEVEL 125 120 115 110 105 100 0 5 AS 10 15 20 NATIONAL INCOME (Billions of euros) 25 The economy has the lowest spare capacity when national income is: ?
Consider the following AD-AS graph of country H. Price level (P) LL OF; E OF; A O B; C O B; A OB; E F LRAS E A D B SRAS3 AD₁ SRAS₁ SRAS2 AD2 Real GDP (Y) Country H is currently at point A. Consumer confidence increases and households increase consumption, then in the short run country H will move to point and in the long to point
The table below shows the total expenditure on a basket of goods and services. Use this information to calculate index numbers for the cost of a basket of goods and services in each period. Assume Period 1 is the base year. Round to one decimal place. Provide your answer below: Period 1 Period 2 Period 3 Period 4 Total Expenditure $1,100 $1,350 $1,400 $1,450 Period 1 Period 2-Period 3 = Period 4 = | Index Number
In the first quarter of 2020, US real GDP declined about 9%, due to the economics shocks from the Covid 19 virus. If prices were completely flexible, and this means all prices, both inputs (such as labor), as well as output prices, what would you think would have been the drop in GDP? If prices are completely fixed, would the drop in GDP be greater or less than the flexible case? Why? If the Expenditure method of accounting for GDP, has to equal the Income Side, and the economy overproduces a particular item, say automobiles, the income side will also be higher, workers will buy the extra cars with extra income and the economy can gyrate indefinitely higher? Why or why not?
Use the following graph to answer the next question. Price Level AS3 AS₁ 0 Real Domestic Output, GDP Which of the following factors will shift AS₁ to AS2? AS₂ A) A decrease in business subsidies B) An increase in input prices OC) A decrease in business taxes D) An increase in real interest rates