The graph below shows the AD-AS diagram for the US.Suppose that the economy is initially in long-run equilibrium with the price level of 700 (Red AD and SRAScurves).Now suppose that dollar depreciates.Price Level12001100-1000900800700-600*500400-300-200-100HITTE100200 300 400 500Real GDPAs a result of this event what is the new short-run price level?600 7008009001000 1100 120Q

Aggregate expenditure describes the total amount of spending in the economy through consumption,…

Answered: The graph below shows the AD-AS diagram…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graph shows a long-run aggregate supply curve and a short-run aggregate supply curve. Draw an arrow along one of the curves that illustrates a rise in the price level when the money wage rate remains unchanged. Label it 1. Draw an arrow along one of the curves that illustrates a rise in the price level accompanied by the same percentage rise in the money wage rate. Label it 2. An increase in the price level when the money wage rate remains unchanged increases OA. potential GDP OB. the quantity of real GDP supplied OC. aggregate supply OD. factor prices by the same percentage as the increase in the price level
Determinants of aggregate demand
Inflation is increasingly becoming a concern among economists. One of the heads of Bank of America has predicted that consumer prices will increase by 8% by the end of 2021. Using the AD/SRAS/LRAS graph show how inflation will effect the AD curve. (Start the graph at the macroequilibrium point and show the changes)
Q₁ Which of the following statements about the economic environment of a country are likely indicators 9 that the economy is hyperinflationary? Select one or more correct options and select Submit. Interest rates, wages and prices are linked to a price index. The general population attempts to keep the amount of local currency held at a minimum either through investing in non-monetary assets or, where possible, converting their local currency into the currency of a country with a stable economy. An increase in the number of strikes by members of a labour union. Sales and purchases on credit are priced to compensate for the expected loss in value during the credit period. The cumulative inflation rate over three years is approaching 80%. Submit
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…
There is a decrease in wealth what will happen to price level and real GDP
In the AD/AS model, a short-run inflationary boom can occur which returns to full employment in the long run because Select one: a. the inflation reduces profitability and output in the short run, but costs eventually fall and output is restored in the long run. b. the boom pushes up prices and salaries in the short run, reducing output, but companies attempt to restore profitability in the long run by pushing prices and salaries back down, which brings output back to full employment. c. aggregate supply is reduced in the short run, along with profit and output, but aggregate demand increases in the long run, along with profit and output, to bring the economy back to full employment. d. it takes a while for costs to catch up to inflation, so inflation boosts revenue, profit, and output in the short run, but the later-rising costs return profit and output to normal in the long run.
1
Assume the following IS-LM model: expenditure sector: money sector: AD = C + I + G + NX I = 300 - 20i M = 700 C = 100 + (4/5)YD G = 120 P = 2 YD = Y - TA NX = -20 md = (1/3)Y + 200 - 10i TA = (1/4)Y By how much will the equilibrium level of income (Y) and the interest rate (i) change, if the Fed responds to an increase in government purchases of 160 by increasing nominal money supply to M' = 1,100?
How is the AD/SRAS/LRAS diagram affected when nominal wages rise while productivity stays the same? (aggregate demand, short run and long run aggregate supply) O Long-run Aggregate Supply (LRAS) shifts to the left. Short-run Aggregate Supply (SRAS) shifts to the left. Aggregate demand shifts to the left.
What would be the impact of an appreciating currency on aggregate demand? a) Decrease b) Increase
Which of the following would initiate a negative AD shock? taxes decrease monetary policy lowers the federal funds interest rate taxes increase household wealth (e.g. equity and/or housing prices) increase

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