The hypothetical economy represented by the graph is currently experiencing a recession. Suppose the central bank attemto increase the growth rate of the money supply to return the economy to its long-run equilibrium. It is able to move theeconomy to a new equilibrium but falls short of its goal. Move the aggregate demand curve to demonstrate this scenario.Long-run aggregale supplyShort-run aggregate supplyAggregate demandReal GDP growth rateInflauen rate

An increase in the growth rate of money supply leads to more cash in the market which increases the…

Answered: The hypothetical economy represented by…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose an economy is in long-run equilibrium. a. Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both short-run and long-run aggregate supply. b. The central bank raises the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (call it point B). c. Now show the new long-run equilibrium (call it point C). What causes the economy to move from point B to point C? d. According to the sticky-wage theory of aggregate supply, how do nominal wages at point A compare to nominal wages at point B? How do nominal wages at point A compare to nominal wages at point C? e. According to the sticky-wage theory of aggregate supply, how do real wages at point A compare to real wages at point B? How do real wages at point A compare to real wages at point C? f. Judging by the impact of the money supply on nominal…
Economic fluctuations I 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. ADAS02004006008001000120024020016012080400PRICE LEVELOUTPUT (Billions of dollars)AD1 AD2 AS In the short run, the decrease in investment spending associated with business pessimism causes the price level torise above the price level people expected and the quantity of output torise above the natural level of output. The business pessimism will cause the unemployment rate tofall below 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…
The following events shift either aggregate demand, aggregate supply, both or neither. Using a diagram, illustrate the effect of the events on the economy. In particular, explain the effect of each event on price level, real GDP and equilibrium in the economy. A) A recent flooding in a small rural region destroyed the potato crop B) A booming economy in a neighbouring country has drawn many working age people (and their families) to emigrate there in search of jobs and better life.
Don't use chatgpt.
Suppose an economy is in long-run equilibrium. The central bank raises the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. Price Level LRAS ------- AS1 Quantity of Output AS2 Aggregate Demand Aggregate Demand Aggregate Supply (?)
Assume initially an economy is at its long run equilibrium. Then, price of oil in theworld increases. What will happen to real GDP and aggregate price level in the short runequilibrium following the increase in price of oil? Use the Aggregate Demand – AggregateSupply model to answer the question.
The economy is in a full-employment equilibrium in year 1. In year 2, the price level decreased and the level of output increased. The most likely cause of the new equilibrium is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An increase in aggregate supply b A decrease in aggregate supply с An increase in aggregate demand A decrease in aggregate demand
Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run. a reduction in government purchases an increase in nominal wages a major improvement in technology imposing in tariff barriers to imports
Suppose the economy is in a situation of moderate unemployment, and then an exogenous increase of aggregate demand occurs. (Assume the aggregate demand schedule follows the pattern set out by the mainstream story.) Use short run aggregate supply and aggregate demand analysis to discuss in detail the effects of this demand change on the price level and real GDP in the short run. Explain how the situation could change in the long run after the happenings in the first part.
Answer both questions that need to be answered and the second question has a graph that’s needs to be answered as well.
Which of the following help to explain why the aggregate demand curve slopes downward? a. When the domestic price level rises, our goods and services become more expensive to foreigners. b. When government spending rises, the price falls. c. There is an inverse relationship between consumer expectations and personal taxes. d. When the price level rises, the real value of financial assets (like stocks, bonds, and savings account balances) declines. Label each of the following descriptions as being either an immediate-short-run aggregate supply curve, a short-run aggregate supply curve, or a long-run aggregagte supply curve. a. A vertical line b. The price level is fixed c. Output prices are flexible, but input prices are fixed d. A horizontal line e. An upsloping curve f. Output is fixed What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case, use a diagram to show the expected effects on the equilibrium price level…
Answer c,d, f

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