The graph below shows an economy in long-run equilibrium. Suppose that aggregate demand unexpectedly increases so that the short-run equilibrium real GDP increases above $80 billion. a. Using the AD AS graph below, demonstrate the new price level and long-run equilibrium real GDP that will result, assuming that the new classical view of a self-correcting economy is accurate. Instructions: Use the tools provided AD2' and AS2' to plot AD and AS after the increase in aggregate demand and the economy's self-correction. Price level 130 120 110 100 90 80 ASL AD₁ 9 Tools AD₂ AS₂

The graph below shows an economy in long-run equilibrium. Suppose that aggregate demand unexpectedly increases so that the short-run equilibrium real GDP increases above $80 billion. a. Using the AD AS graph below, demonstrate the new price level and long-run equilibrium real GDP that will result, assuming that the new classical view of a self-correcting economy is accurate. Instructions: Use the tools provided AD2' and AS2' to plot AD and AS after the increase in aggregate demand and the economy's self-correction. Price level 130 120 110 100 90 80 ASL AD₁ 9 Tools AD₂ AS₂

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Take a look again at Figure 1 (originally from the page in the text titled "Neoclassical and Keynesian Perspectives in the AD-AS Model.") Price Level Pn Pi Pk ADK AD Yk ADn Ek Keynesian zone Real GDP Ei LRAS En SRAS Neoclassical zone Intermediate zone Yi Yn Figure 1. Keynes, Neoclassical, and Intermediate Zones in the Aggregate Supply Curve. Near the equilibrium Ek, In the Keynesian zone at the far left of the SRAS curve, small shifts in AD, elther to the right or the left, will affect the output level Yk, but will not much affect the price level. In the Keyneslan zone, AD largely determines the quantity of output. Near the equilibrium En. In the neoclassical zone at the far right of the SRAS curve, small shifts in AD, elther to the right or the left, will have relatively little effect on the output level Yn, but Instead will have a greater effect on the price level. In the neoclassical zone, the near-vertical SRAS curve close to the level of potential GDP largely determines the…
Please help me with these two questions
Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?
On the graph, label your starting AD line as AD 2019. Draw a new AD line showing the change to AD due to the pandemic. Label your starting SRAS line as SRAS 2019. Draw a new SRAS line showing the change to supply due to the pandemic.Label the new short-run equilibrium RGDP and Price Level. Does output (i.e. RGDP) increase or decrease in your model? Does the price level increase or decrease in your model? According to the AD-AS model when RGDP falls the unemployment rises and vice versa. Does your graph indicate an increase or decrease in the unemployment rate
Comparing ModelsWhat are the differences between our Keynesian Cross and the Macro Equilibrium (AS and AD) diagram? Which model has more to offer?
Prompt We have been discussing major macroeconomic concepts like the ADAS Model and Fiscal Policy. This is an opportunity to apply that knowledge to a real-world scenario. Choose one of the following scenarios and identify whether it is an example of a recessionary economy or inflationary economy. Next, analyze possible Neoclassical solutions for it. Then, analyze possible Keynesian solutions for it. What would the impact on the economy be in the short-run? Long-run? Scenario 1: An increase in the unemployment rate to 7.4% has occurred. Inflation has increased causing a decline in consumer spending. Exports have declined by more than $4 billion. This has caused a decrease in GDP by 3.7%. Scenario 2: An increase in consumer and government spending has occurred. This has increased GDP by 4.4%. Currently, inflation rate has increased to 1.6%. Unemployment has remained at 5.5%. Scenario 3: An increase in the stock market by 26.5% has occurred. Companies are stockpiling the earnings…
Consider an AS AD diagram. What would happen in the model if Energy prices increased? Group of answer choices a. AD shifts right and prices increase while real GDP increases b. AS shifts left and prices increase while real GDP decreases c. AS shifts right and prices decrease while real GDP increases d. AD shifts left and prices decreases while real GDP decreases
The graph below depicts a decrease in aggregate demand due to a decrease in gross investment. This decrease in aggregate demand is depicted as a shift from AD to AD1. Tools LRAS AS AS1 AD1 AD Real GDP Price Level
Draw and properly label an AD-AS model to show Keynesian, intermediate, and neoclassical zones. Then, briefly explain the levels of unemployment, inflation and real GDP in each zone, and also confirm whether all three goals of a macro economy are being achieved in each zone. 2. Draw and properly label the AD-AS graphs or one AD-AS graph to show recessionary and inflationary gaps. Then, discuss in detail how Keynesians suggest that recessionary and inflationary gaps be closed. 3. Draw and properly label AD-AS graphs or one AD-AS graph to show recessionary and inflationary gaps. Then, discuss in detail how neoclassicals suggest that recessionary and inflationary gaps be closed.
Please refer to the diagram below representing a hypothetical economy. In this case, AD1 represents a "before" curve and AD2 represents an "after' curve. Imagine that you have lived through this scenario. What have you likely observed? Prices O Prices are higher. SRAS1 O All the above. AD1 O The economy is in recession. O Unemployment has increased. RGDP AD2
35. How would you resolve the situation in terms of AD and AS and create a situation where AD = AS= potential GDP.
What would a Keynesian likely recommend in response to a recession?