The graph shows the aggregate demand (AD) curve and thelong-run aggregate supply (LRAS) curve for a hypotheticaleconomy. Suppose that the economy observes an increase inthe human capital of workers, causing productivity to rise.Show the effect of this change by shifting one of the curvesin the graph.LRASHow will this change affect the rate of inflation?Inflation will fallInflation will rise,Inflation will be unchanged.ADHow will this change affect the growth rate?Real GDP growth rateThe growth rate will decrease.The growth rate will increase.The growth rate will be unchanged.

Increase in human capital:If Human capital of workers increase in an economy, then the long-run…

Answered: The graph shows the aggregate demand…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In Thanosland, the production function is Cobb - Douglas. Suppose that between two periods (2016 and 2017), both the capital and labor input doubled and nothing else changed in the production function. Also, suppose that the money supply and velocity remained constant in this period. If the GDP deflator in 2016 was 100, what is true about GDP deflator in 2017? a. It is 50 b. It is 100 c. It is 200 d. We need more information
Use two graphs in the AD-AS framework to compare and contrast demand-pull and cost-push inflation. How do their causes differ? How do the outcomes (inflation, output, employment) differ?
Suppose that the economy is depicted in the graph to the right. Using the line drawing tool, show demand-pull inflation by correctly shifting aggregate demand. Label the new line 'AD, Carefully follow the instructions above, and only draw the required objects. stion 5.1 here to search
As the Federal Reserve sharply raises rates in the face if substantial inflationary pressures, economists are trying to gauge the extent to which the U.S. labor market is slowing. First, how might you try to measure labor market slack? Second, across the business cycle, describe how the gap between whatever is true unemployment, and a notion of “full” employment generally relates to inflationary pressures. Finally, relate this gap to the economy’s overall ‘output gap’ (actual GDP vs. potential GDP).
During July 2020, Japan’s u was 2.6%; economists have estimated that Japan’s un is 2.5%. If Japan has an accelerationist PC, what would have happened to Japan’s inflation rate during July? Illustrate fully by showing where Japan was functioning using the appropriate graph. Make all your assumptions clear.
Classify each of the following as a supply shock or a demand shock. Use a graph to show the effects on inflation and output in the short run and in the long run: a. Households and firms become more optimistic about the economy. b. Favorable weather causes an increase in crude palm oil production in Malaysia. c. Typhoon Rai hit Philippines and caused a massive destruction of houses and 400 death tolls.
The country of Freeland has an aggregate demand curve determined by the equation Freeland also has a potential growth rate of 2%. Using this information, draw Freeland's aggregate demand (AD) and long-run aggregate supply (LRAS) curves on the graph. 12 LRAS 10 AD 8 7 3 2 0 2 1 012 34 5 6 789 10 Real GDP growth rate (%) What is the prevailing inflation rate in Freeland? prevailing inflation rate:
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The inflation rate C The price level C The level of technological knowledge The size of the labor force Suppose the economy produces real GDP of $70 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 112 108 104 100 10 20 30 40 50 60 70 80 OUTPUT (Billions of dollars) Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to which will: O Shift the long-run aggregate supply curve to the right O Shift the long-run aggregate supply curve to the left O Not affect the long-run aggregate supply curve PRICE LEVEL

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