Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 10, Problem 12CQ
(a)
To determine
Identify the price level and quantity of
(b)
To determine
Identify if the economy is in long-run equilibrium or not.
(c)
To determine
Identify the
(d)
To determine
Identify the expected resource price and the equilibrium rate of output in the future.
(e)
To determine
Identify the expected rate of GDP during the given period.
Expert Solution & Answer
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Students have asked these similar questions
As you know, supply and demand shifts are caused by one of their determinants. Shifts in aggregate
demand (AD) show the effect of events on price level and Real GDP. Any event that causes a change in
consumer, business, or government spending or any change in net exports (C+l+G+Xn) will shift AD.
Any event that causes a change in production costs or increases productivity will shift aggregate
supply (AS).
Decide if the following events are Micro, shifting supply or demand, or Macro, shifting AD or AS. Give
the direction in which the graph shifts.
Demand
Situation
Aggregate
Supply
Aggregate
Demand
Supply
Sales of Atlanta Braves gear grows
with the success of the team.
1.
The President and Congress pass a
trillion dollar stimulus bill to
provide aid during recession.
2.
3.
Salmonella outbreak in peanut
processing plants threatens
lunches for school children.
4.
Pomegranates are shown to be
cancer fighting superfoods.
Value of U.S. dollars declines,
exports increase.
5.
Global oil prices…
Suppose England's economy is in long-run equilibrium. As a result of the coronavirus, the British government orders all non-essential businesses to close and issue “shutter in” and other “stay at home” directives requiring its citizens and residents not to leave their residences absent emergencies and/or to purchase food and groceries from markets (that is, people cannot, for example, go to restaurants, movies or sporting events and the like.) If so, then we would predict that in the short-run England's
A.
real GDP will fall and the price level might rise, fall, or stay the same.
B.
real GDP will rise and the price level might rise, fall, or stay the same.
C.
the price level will rise, and real GDP might rise, fall, or stay the same.
D.
the price level will fall, and real GDP might rise, fall, or stay the same
Need help with this. Need eveyrthing answered and please show how to do the graph. THank you !
Chapter 10 Solutions
Economics: Private and Public Choice (MindTap Course List)
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Similar questions
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- Answer both questions that need to be answered and the second question has a graph that’s needs to be answered as well.arrow_forwardSuppose the full-employment level of real output ( Q) for a hypothetical economy is $250 and the price level (P ) initially is 100. Use the short-run aggregate supply schedules below to answer the questions that follow: a. What will be the level of real output in the short run if the price level unexpectedly rises from 100 to 125 because of an increase in aggregate demand? What if the price level unexpectedly falls from 100 to 75 because of a decrease in aggregate demand? Explain each situation, using figures from the table.b. What will be the level of real output in the long run when the price level rises from 100 to 125? When it falls from 100 to 75? Explain each situation.c. Show the circumstances described in parts a and b on graph paper, and derive the long-run aggregate supply curve.arrow_forwardSuppose 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.arrow_forward
- The graph to the right shows an economy's aggregate demand curve. Show the determination of the economy's long-run macroeconomic equilibrium by (i) using the Line tool to draw and label the long-run aggregate supply curve to show an equilibrium and (ii) using the Point tool to identify the equilibrium point. Label this point E. Price level Real GDP AD Earrow_forwardI don't quite understand what is asking of the change that will occur in the long runarrow_forwardThe economy of Chicagoland is currently producing $65 Million worth of goods and services (current real GDP). Full employment output for Chicagoland is $75 Million worth of goods and services (full employment real GDP). The price level has been declining recently. This has occurred due to a negative AD shock. Use an AD/AS graph to show the macroeconomy of Chicagoland. Label the graph correctly. First, show the long run equilibrium of Chicagoland using aggregate demand (AD) and short run aggregate supply (SRAS) at full employment. Label the full employment output Yf, and the corresponding price level, PL. Then, use Y1 to represent the current real GDP and PL1 to represent the current price level.arrow_forward
- Assume that the long-run aggregate supply curve is vertical at Y = 3.000 while the short-run aggregate supply curve is horizontal at P=1.0, . The aggregate demand curve is Y = 2(M / P) and M = 1,500. a. If the is initially in long-run equilibrium, what are the values of P and Y? Draw the equilibrium using AD and short and long run AS curves.arrow_forwardThe graph on the right shows a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium at point A. Assume that there is an unexpected increase in the price of oil. 1.) Use the line drawing tool to show the resulting short-run equilibrium on your graph. Label any new aggregate demand or aggregate supply curve as AD2, SRAS2 or LRAS2 as appropriate 2) Use the point drawing tool to locate the new short-run equilibrium point Label this point B Carefully follow the instructions above, and only draw the required objects Price level (GDP Deflator, 2005 = 100) LRAS₁ A SRAS₁ Real GDP (trillions of 2005 dollars) AD1arrow_forwardAssume an economy operates in the intermediate range of its aggregate supply curve. State the direction of shift for the aggregate demand curve or aggregate supply curve for each of the following changes in conditions. What is the effect on the price level? On real GDP? On employment? a. The price of crude oil rises significantly (300%, say) raising the price of energy generally. b. Spending on national defense doubles. c. Investment spending falls as firms expect slower sales growth. d. An improvement in technology raises labor productivity. e. The United States raises exports of new passenger aircraft to China.arrow_forward
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