The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion.Suppose firms become pessimistic about future business conditions and cut back on investment spending.Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism.?240ASPRICE LEVEL2001601208040F2ŐF3Ö+F4ADF50F6AD-DASF7F8(9F9CISF10O:F11F12FnLockInser PRICE LEV12080400AD020040060080010001200OUTPUT (Billions of dollars)the price levelIn the short run, the decrease in investment spending associated with business pessimism causes the price level topeople expected and the quantity of output tothe natural level of output. The business pessimism will cause the unemployment ratetothe natural rate of unemployment in the short run.Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion,before the decrease in investment spending associated with business pessimism.and theDuring the transition from the short run to the long run, price-level expectations willcurve will shift to theF7F6F4F2F5F3:0+8-DF8F9OF10OF11F122FnLock

Change in aggregate demand due to decrease in investment spending:-

The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose firms become pessimistic about future business conditions and cut back on investment spending. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism.

The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose firms become pessimistic about future business conditions and cut back on investment spending. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism.

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 following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to the price level people expected and the quantity of output to the natural level of output. The stock market boom will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in consumption spending associated with…
Is a change in business investment a determinant of aggregate demand or aggregate supply? What happens to the equilibrium Real GDP and price level when business investment decreases? Would this cause a recession or inflation? Is a change in consumer spending a determinant of aggregate demand or aggregate supply? What happens to the equilibrium Real GDP and price level when consumer spending decreases? Would this cause a recession or inflation?
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300 billion. Suppose households suddenly begin to spend less and save more in order to increase saving for retirement. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase in saving. PRICE LEVEL 240 200 160 120 8 40 0 0 100 200 300 400 OUTPUT (Billions of dollars) AS AD 500 600 AD AS A In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to price level people expected and the quantity of output to the unemployment rate to the the natural level of output. The sharp increase in saving will cause the natural rate of unemployment in the short run.
Using the three-point curved line drawing tool, show how the following event will impact the economy's short-run aggregate supply (AS) curve. Properly label this curve. 12- 11- Event: 10- High taxes and excessive regulation cause firms to reduce the quantity of their physical capital. 9- Note: Carefully follow the instructions above and only draw the required object. ASO 8- 4- 3- 2- 1- 0- 10 Aggregate output (income), Y Price level, P
Using the graph, illustrate the long-run impact of the stock market boom by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions. PRICE LEVEL 240 200 160 120 80 40 0 100 200 300 400 OUTPUT (Billions of dollars) AS AD 500 600 In the long run, due to the stock market boom, the price level output, and the unemployment rate the natural rate. 0 2 0 2 , the quantity of output the natural level of
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300 billion. Suppose households suddenly begin to spend less and save more in order to increase saving for retirement. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase in saving. 240 AS 200 AD 160 AS 120 80 AD 40 100 200 300 400 500 600 OUTPUT (Billions of dollars) In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to the price level people expected and the quantity of output to the natural level of output. The sharp increase in saving will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300 billion, before the decrease in consumption…
The following graph depicts a macro equilibrium. Answer the questions based on the information in the graph (d) If the multiplier were equal to 4, how much additional investment would be needed to increase aggregate demand by the amount of the initial GDP gap?(e) Illustrate the changes in autonomous investment and induced consumption that occur in(d).(f) What happens to prices when aggregate demand increases by the amount of the initial GDP gap?
8. Economic fluctuations I The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $300 billion. Suppose households suddenly begin to spend less and save more in order to increase saving for retirement. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase in saving. PRICE LEVEL 240 200 160 120 8 40 100 200 300 400 OUTPUT (Billions of dollars) AS AD 500 600 AD AS ? In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to people expected and the quantity of output to rate to the natural rate of unemployment in the short run. the price level the natural level of output. The sharp increase in saving will cause the unemployment
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose firms become pessimistic about future business conditions and cut back on investment spending. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism. 240 AS AD AS O PRICE LEVEL 200 160 120 80 40 AD
In the following figure, the economy is initially in equilibrium at full-employment at point “e”. Assume that consumption falls by 100 leading to a shift in AD from AD1 to AD2. What is the new short-run macroeconomic equilibrium price and output? How large is the spending multiplier if there were no changes in the aggregate price level? How large is the spending multiplier if the aggregate price level adjusts to the new equilibrium?
The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose firms become pessimistic about future business conditions and cut back on investment spending. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism. In the short run, the decrease in investment spending associated with business pessimism causes the price level to (rise above/fall below) the price level people expected and the quantity of output to (rise above/fall below) the natural level of output. The business pessimism will cause the unemployment rate to (rise above/fall below) the natural rate of unemployment in the short run. Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $600 billion, prior to the…
The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $300 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. PRICE LEVEL 3 AS 200 AD -α- 180 8 0 100 200 300 AD 400 500 600 OUTPUT (Billions of dollars) AS (?) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to level people expected and the quantity of output to the price the natural level of output. The stock market boom will cause the unemployment rate to ▼the natural rate of unemployment in the short run. Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $300 billion, prior to the…