Using an AD/AS diagram (starting from long-run/full employment equilibrium), graphically show and verbally describe how each of the following events would affect the U.S. economy's equilibrium real GDP and price level. a. Discovery and implementation of new technology b. Mexico's economic growth increases faster than ours c. There is a general increase in the price of raw materials d. The number of workers in the labor force decreases due to pandemic retirements/death

Using an AD/AS diagram (starting from long-run/full employment equilibrium), graphically show and verbally describe how each of the following events would affect the U.S. economy's equilibrium real GDP and price level. a. Discovery and implementation of new technology b. Mexico's economic growth increases faster than ours c. There is a general increase in the price of raw materials d. The number of workers in the labor force decreases due to pandemic retirements/death

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Determinants of aggregate demand The following graph shows a decrease in aggregate demand (AD)…

A: The changes in the determinants that will lead to a fall in aggregate demand are:Consumer…

Q: a. You lower your price, and at the same time, many of the local rivers are closed to fishing due to…

A: a)in first case the demand would drop down considerably as river are down so people will not be…

Q: If an industry exhibits economies of scale, one larger firm may be able to produce goods at a lower…

A: The long-run average costs fall as more output is produced. Economies of scale is the idea that…

Q: Using the AD/AS model, what would be an explanation for observing an increased price level and a…

A: Business cycles provides the details on a declining, slowing down, and speeding up of the economy,…

Q: Suppose the economy of Hawkland is initially at full employment. Currently real GDP is $20 trillion,…

A: Labor market is defined as the market where the firms and labors meet and agree with the conditions…

Q: Plot an AD/AS diagram from the data above. Identify the equilibrium. Would you expect unemployment…

A: Total demand and total supply in the economy are referred to as aggregate demand and aggregate…

Q: 1000 Real GDP What is the price level in the new long-run equilibrium as a result of this shift? NƠ…

A: Aggregate demand curve represents the sum of quantity demanded by all the consumers in the economy…

Q: Please draw four AD/AS diagrams (t-0,1,2,3) to show how the Covid-19 pandemic has affected our…

A: Aggregate Demand and Aggregate Supply Aggregate demand refers to the entire amount of demand for…

Q: What is the new GDP in the short-run as a result of this shift? What is the new price level in the…

A: As per the inquiry, the given graph speaks to the since quite a while long run and short-run market…

Q: During the spring of 2016 the Midwestern U.S., which has a large agricultural base, experiences…

A: The AD-AS model of macroeconomic equilibrium establishes the long-run aggregate output and price…

Q: There is a decrease in AD. ow on one AГА dra prices in both the short-run and the long-run. Mark the…

A: Aggregate Demand and Aggregate Supply Curves: The AD curve shows a link between the price level and…

Q: Depict in the AD-AS model, an economy exhibiting a short run equilibrium with a negative output gap…

A: In the graph, initial long-run equilibrium is at point A where AD0 (aggregate demand), LRAS0…

Q: include a graph that shows where Canada currently is on the business cycle. Also include an AD-AS…

A: The economies around the world works according to the changes in the changes in their consumption…

Q: Question b The output level on a AD/AS graph when all factors of production are being used is called…

A: The link between the total quantity of production demanded (measured in real GDP) and the price…

Q: Suppose the Australian government increases the level of government spending. Explain how an…

Q: AS/AD Graph Short Run Illustrate the short run part (3) via an AS / AD diagram

Q: The following graph shows an aggregate demand (AD) curve and a short-run aggregate supply (SRAS)…

A: Answer: (1). If the economy experience a decrease in wage rate means the cost of production will…

Q: Suppose the economy experiences a "supply shock" due to a fall in oil prices. As a result, the…

A: Gross Domestic Product (GDP) refers to the total or final value of all the goods and services that…

Q: Using graphical illustration of AS-AD framework, show the effects of following events on real output…

A: 1) Government raises taxes by $100 billion. This would lead to a reduction in disposable income as…

Q: The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve…

A: The image is unreadable. Kindly upload again.The given graphs are blurry.Reupload the question to…

Question

### Economic Scenarios Using AD/AS Diagrams

This educational resource outlines how various events impact the U.S. economy's equilibrium real GDP and price level in an Aggregate Demand/Aggregate Supply (AD/AS) framework. Each scenario begins from a long-run, full-employment equilibrium.

1. **Discovery and Implementation of New Technology**
- **Impact:** Increased productivity shifts the Long-Run Aggregate Supply (LRAS) and Short-Run Aggregate Supply (SRAS) curves to the right. This results in higher real GDP and potentially lower price levels.

2. **Mexico’s Economic Growth Increases Faster than Ours**
- **Impact:** Stronger economic growth in Mexico may lead to increased demand for U.S. exports, shifting the Aggregate Demand (AD) curve to the right. This would increase both real GDP and the price level.

3. **There is a General Increase in the Price of Raw Materials**
- **Impact:** Higher raw material costs shift the SRAS curve to the left, leading to higher price levels and lower real GDP.

4. **The Number of Workers in the Labor Force Decreases Due to Pandemic Retirements/Death**
- **Impact:** A decrease in the labor force shifts the LRAS and SRAS curves to the left, decreasing real GDP and increasing price levels.

5. **The Cost of Labor (Wages) Rises**
- **Impact:** Higher wages increase production costs, shifting the SRAS curve to the left. This results in higher prices and lower real GDP.

6. **A New Congress Decreases Government Spending**
- **Impact:** Reduced government spending shifts the AD curve to the left, leading to lower real GDP and price levels.

7. **The Price of Oil is Expected to Fall**
- **Impact:** Lower oil prices reduce production costs, shifting the SRAS curve to the right and potentially lowering price levels while increasing real GDP.

8. **Consumer Confidence Falls**
- **Impact:** Decreased consumer spending shifts the AD curve to the left, resulting in lower real GDP and price levels.

These scenarios demonstrate the complex interactions between various factors and their measurable effects on the economy using the AD/AS model.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Write an introduction

VIEW

Step 2: Show the effect for scenario (A)

VIEW

Step 3: Show the effect for scenario (B)

VIEW

Step 4: Show the effect for scenario (C)

VIEW

Step 5: Show the effect for scenario (D)

VIEW

Step 6: Show the effect for scenario (E)

VIEW

Step 7: Show the effect for scenario (F)

VIEW

Step 8: Show the effect for scenario (G)

VIEW

Step 9: Show the effect for scenario (H)

VIEW

Solution

VIEW

Step by step

Solved in 10 steps with 8 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

The COVID-19 pandemic continues to present new challenges to the Australian economy. The Treasury has announced that they continue to support the economy by adding $41 billion in direct economic support, bringing total support since the beginning of the pandemic to $291 billion as of May 2021. Using a AD-AS graph, illustrate how this support would impact on economic growth and inflation in the short and long term
Following an increase in consumer confidence, the US economy is experiencing a significant increase in aggregate spending. Using a correctly labeled aggregate demand and aggregate supply diagram, show how the change in aggregate spending will affect each of the following in the short run -Output -The price level
Please Use the Aggregate supply and Aggregate Demand Model below to answer the questions that follow. Examine the influence of government expenditure on investment in a nation. Use Jot Inc. Ltd a multinational construction company in which you are the Chief Exec of the firm that that is highly diversified and recieves funds to construct highways and other government funded projects. Also, explain the factors that cause the Aggregate Demand curve to be downward sloping left to right. Thanks
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…
Use the AD/AS framework to explain how the economy adjusts in the short run and the long run to each of the following (assuming that the economy starts at potential GDP with no spare Capacity and a given price level): a) World energy prices rise and then settle at a new higher level, and this raises input prices for all domestic producers. b) There is a one-off fall in export demand which stays at the new lower level. c) The monetary policy makers lower their official interest rate and hold it at the new lower level. d)The government raises its current spending and keeps it at the new level. e)Say what might have happened to the other components of aggregate demand when the economy has adjusted to the change In d) in the long run.
Which of the following would NOT cause a shift in AD? Select one: a. A reduction in interest rates b. A fall in the cost of production c. A reduction in income tax d. An increase in government spending
The figure below is a part of the AD-AS model as a description of the current situation of an economy. PA=$10 P YA=4000 Y a) Find the short-run equilibrium (i.e. the real output and the price level thereof) of this economy. b) If the natural level of output is 3500, which one will be higher, the unemployment rate at point A, or the natural unemployment rate? Explain. c) Give two reasons as to why the short-run aggregate supply is upward sloping. d) Suppose the government takes no action about the situation indicated above. Explain, with the help of a figure properly labeled, what will happen in this economy in the long run. e) Describe the two kinds of macroeconomic policies that can be used in the situation described before part c). Indicate clearly in your description whether each policy is to the aggregate demand or aggregate supply or Further, give reason(s) as to why the government may want to use these policies rather than doing nothing.
The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 240 200 160 40 0 0 3 SRAS[120] 6 9 12 REAL GDP (Trillions of dollars) 15 18 SRAS[120] 0 (?) Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph:
Using AD-AS diagram show how the change in productivity in the Ghanaian economy in 2017 affected the Real GDP and prices
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 SRAS curves). Now suppose that dollar depreciates. Price Level 1200 1100- 1000 900 800 700- 600* 500 400- 300- 200- 100 HITTE 100 200 300 400 500 Real GDP As a result of this event what is the new short-run price level? 600 700 800 900 1000 1100 120 Q
The graph below shows the AD-AS diagram for Spain. All numbers are in billions. 1. What is the size of real GDP in the short-run equilibrium? answer "a". 2. What is the price level in the short-run equilibrium? answer "b". 3. What is the level of Potential GDP in Spain? answer "c".
do fast