Use the following scenario for the next two questions. Suppose that the federal government decides to forgive all current (and future) outstanding student loans (estimated to total around $1.6 trillion as of early 2020). When thinking about the AD/AS model, which curve would this shift in the short-run, and in which direction? AD curve, to the left AD curve, to the right OSRAS curve only, to the right OSRAS and AD curves, to the left OSRAS and LRAS curves, to the left

Use the following scenario for the next two questions. Suppose that the federal government decides to forgive all current (and future) outstanding student loans (estimated to total around $1.6 trillion as of early 2020). When thinking about the AD/AS model, which curve would this shift in the short-run, and in which direction? AD curve, to the left AD curve, to the right OSRAS curve only, to the right OSRAS and AD curves, to the left OSRAS and LRAS curves, to the left

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayeks idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce?
Which of the following is a major difference between the AD-AS model and the dynamic AD-AS model? The dynamic AD-AS model assumes OA. AD only includes consumption, investment, and government purchases, while the AD-AS model assumes AD includes consumption, investment, government purchases and net exports. B. the SRAS is stable and will not shift, while the AD-AS model assumes the SRAS can only change with an exogenous event such as oil price changes. OC. the economy does not experience long-run growth, while the AD-AS model assumes there is constant inflation in the economy. OD. potential GDP increases continually, while the AD-AS model assumes the LRAS does not change.
What is the best approach to managing the economy, supply-side or demand-side economics? There are two schools of thought on how to managing the economy. The first is demand-side economics which also the Keynesian approach. This approach maintains that the demand for products and services drives the economy as such economic policies should focus on the aggregate demand curve. The other approach is called supply-side economics or more popularly referred to as Reaganomics. In this trickle-down approach, it is postulated that the production of goods and services is what drives the economy with the focus on the aggregate supply curve. Both fiscal and monetary policies have the potential to stimulate change in either the aggregated demand or the aggregate supply curves. In your initial post defend which approach should be used to (ensure to include in your subject line, which approach you are defending): Restore the economy that is in a recession. Identify the challenges that may be…
Explain by using the AD- AS diagram how in absence of any government intervention the economy may correct itself in the long run. ALso if suppose the government decides to intervene to steer the economy in the right direction. What kinds of policies would the government possibly take? Please show the impact of such policies on the economy using the AD-AS diagram.
An improvement in technology causes which curve(s) to shift? SRAS, and LRAS curves The AD and SRAS curves The AD curve Only SRAS
(Note: All your answers should be rounded to the nearest hundredth. Example: 12.034 =>12.03, 5.175=>5.18) For each of the following situations, use an AD/AS model to describe what happens to price levels and output in the United States in the short run. In each case assume the economy starts in long- and short-run equilibrium, and show the appropriate shifts in the AS or AD curves. Suppose that the AD and AS curves are given as: AD: AS: P=6.1-0.2 Y(GDP) P= -1 +0.15 Y(GDP) Using Excel create a spreadsheet with the column headings Y, AD,JAS, G, and T. Let's start with no change in G, and T. Fill in the spreadsheet's cells for Y= 19.0 to Y= 21.0 in increments of 0.1. What is the equilibrium GDP? What is the equilibrium P? Now, there is a decrease in Tax (T), i.e., tax cut by $1 (trillion). It is assumed that an 1 unit decrease in T shifts the AD curve to the right by 0.08 units. If P and Y (GDP) won't change immediately, what happens to the nation's output? (surplus, shortage, or no…
During 2000, there was a sharp reduction in stock prices and a sharp increase in the world price of crude oil. How will aggregate demand and aggregate supply in the United States be influenced by these two factors? Using the AD-AS model, explain the expected impact on output.
Assume the graph represents the Japanese economy during the first quarter of 2014. Use the information from the seventh paragraph of the Washington Post article Japan Recession, Europe Stagnation Cast Pall over Global Economic Outlook to demonstrate how the policies of Prime Minister Shinzo Abe affected the economy in the subsequent quarters of 2014. The graph depicts aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS). LRAS is sometimes labeled potential output.
Let's say you are the chair of economic advisors to the president. Assume that the economy, as depicted in an AD/AS framework is at: potential (full employment) output, The intersection of the SRAD, SRAS, and LRAS, all intersect at the level of potential (full employment) output and a corresponding price level ( or an acceptable rate of inflation). The economy's mpc is .75, which is presumed to remain constant. Now, global problems emerge, and the US decided to produce many new fighter jets immediately to the region under duress. The new jets will cost $55 b., and other expenditures by the government cannot be cut. The president is concerned that the new expenditures will create an inflation, but needs to produce the new jets immediately. What policies would you propose, that would enable the country to produce the new jets, without creating an inflation? Use the AD/AS framework to illustrate your answer. Assume any taxes are lump sum taxes. Specify the spending and taxing…
What happens when firms and workers underestimate future prices in the economy? Focus your answer on what would happen to actual output as opposed to the expected potential output. (Course is macroeconomics).
The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion. The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change needed to decrease AD Wealth (increase/ decrease) Taxes (increase/ decrease) Expected rate of return on investment (increase/ decrease) Incomes in other countries (increase/ decrease)
In the AD/AS model assume 2019 began with potential real GDP = $19.7 trillion, while actual real GDP = $19.0 trillion and the Price Level (GDP Deflator) = 210. A year later the Price Level = 214 and actual real GDP = $18.9. Based on their relative effects on the AD/AS model, which of the following scenarios best explains this new outcome? The effect of %3D Group of answer choices an increase in government spending is MORE than the effect of decreased electricity prices. an increase in wages is LESS than the effect of a decrease in government spending. a decrease in oil prices is MORE than the effect of positive consumer expectations. an increase in inflationary expectations is MORE than the effect of increased government spending.