Which of the following reasons could explain why the aggregate quantity of output supplied changes? Wages are not sticky. The price level bas risen. People have misperceptions about the price level. Prices are sticky. On the preceding graph, show what happens to the short-run aggregate-supply curve in the long run. (Note: For now, assume there is no change in the long-run aggregate-supply curve.) The aggregate quantity of output demanded eck all that apply. between the short run and the long run because the price level The increase in investment spending might cause the long-run aggregate-supply curve to shift to the increases productivity and output in the future. if it results in a larger capital stock that

Which of the following reasons could explain why the aggregate quantity of output supplied changes? Wages are not sticky. The price level bas risen. People have misperceptions about the price level. Prices are sticky. On the preceding graph, show what happens to the short-run aggregate-supply curve in the long run. (Note: For now, assume there is no change in the long-run aggregate-supply curve.) The aggregate quantity of output demanded eck all that apply. between the short run and the long run because the price level The increase in investment spending might cause the long-run aggregate-supply curve to shift to the increases productivity and output in the future. if it results in a larger capital stock that

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 3CQQ

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11. Recession True or False: The aggregate-demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods. True False
R T 3. Price level B K SAS 1 SASO Real output C. an increase in aggregate demand. D. a decrease in aggregate demand. IUO Refer to the graph shown. A movement from A to C is most likely to be caused by: A. an increase in input prices. B. a decrease in input prices. NG
2. Suppose an economy is described by the following aggregate demand and short-run aggregate supply curves. The potential level of output is $10 trillion. Aggregate Quantity of Goods and Services Price Level Demanded Supplied 3.0 $11.0 trillion $9.0 trillion 3.4 $10.8 trillion $9.2 trillion 3.8 $10.6 trillion $9.4 trillion 4.2 $10.4 trillion $9.6 trillion 4.6 $10.2 trillion $9.8 trillion 5.0 $10.0 trillion $10.0 trillion 5.4 $9.8 trillion $10.2 trillion 5.8 $9.6 trillion $10.4 trillion 6.2 $9.4 trillion $10.6 trillion 6.6 $9.2 trillion $10.8 trillion 7.0 $9.0 trillion $11.0 trillion Draw the aggregate demand and short-run aggregate supply curves. What is the initial real GDP? What is the initial price level? What kind of gap, if any, exists? After the increase in health-care costs, each level of real GDP requires an increase in the price level of o.8. For example, producing $9.0 trillion worth of goods and services now requires a price level of 3.8. What is the short- run equilibrium…
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. (a) An increase in government expenditure in infrastructureClick or tap here to enter text.(b) A severe recession occurs in a country, which has been a major importer of thenation’s exports.Click or tap here to enter text.(c) The federal government increases business taxesClick or tap here to enter text.(d) The Central Bank increases the cash interest rate
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on: aggregate demand, aggregate supply, price level, real GDP.(a) A decrease in government expenditure in infrastructure(b) A severe recession occurs in a country which has been a major importer of thenation’s exports.(c) The federal government increases business taxes with diagram
3. What role do imports play in aggregate demand? Under which conditions will changes in imports expand aggregate demand? Reduce aggregate demand?
1. Aggregate demand curves slope downwards for each of the following reasons EXCEPTA. The wealth effect: As the price level falls, the buying power of people’s savings increases andinduces them to spend more.B. The substitution effect: As the price level falls, people buy more of the cheaper goods and lessof other goods.C. The interest rate effect: As prices for outputs rise, it costs more to make the same purchases,driving up the demand for money, raising interest rates and reducing investment spending.D. The foreign price effect: As the price level falls, U.S. become more attractive to foreignersand domestic residents, increasing net export spending.
3. Explain how each of the following will affect aggregate demand. In each case, draw a diagram to show the effect on the aggregate demand curve. (a) Negative economic indicators cause firms to become pessimistic about the future of the economy. (b) Banks become complacent and begin taking on riskier business loans at lower interest rates. (c) The government passes legislation that increases the rate of corporate taxes. (d) Inflation leads the central bank to increase the base interest rate.
Question 28 Macroeconomists would suggest that an economy experiencing high unemployment should adopt policies to O reduce aggregate demand. O increase aggregate demand. O increase aggregate supply. O reduce aggregate supply.
8. Economic fluctuations I The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose the government Increases spending on building and repairing highways, bridges, and ports. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the Increase in government spending. 240 200 160 120 PRICE LEVEL 80 40 0 240 200 0 160 120 200 40 In the short run, the increase in government spending on infrastructure causes the price level to the quantity of output to 0 400 600 800 OUTPUT (Billions of dollars) Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $600 billion, prior to the increase in government spending on infrastructure. Along the transition from the short run to the long run, price-level expectations will curve…
Which of the following would cause the aggregate supply curve to increase... Throughout the economy, workers are using better equipment and output per hour is rising. O Consumers are more confident and spending more than before. The government has reduced its spending by more than 10% over the last 2 years Energy prices such as gas and electricity have increased rapidly throughout the country. 1 f6 1 f7 Mill liji fg 110
8. 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 the government increases spending on building and repairing highways, bridges, and ports. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the increase in government spending. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in government spending on infrastructure causes the price level to the price level people expected and the quantity of output to the natural level of output. The increase in government spending will cause the unemployment rate to 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 natural level of output of $600 billion, before the increase in…