ECON MACRO (with ECON MACRO Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305659094
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 10, Problem 2.4P
To determine
The expansionary and recessionary Gap
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
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Chapter 10 Solutions
ECON MACRO (with ECON MACRO Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- Use the New-Keynesian model with partial sticky price to briefly discuss the reasons of the current high inflation in Australia. Use the Aggregate supply-Aggregate Demand diagram to support your answer.arrow_forwardPlease note I only need help with Part 4 and 5. I have answers for the other parts. Thank you so much for your time and effort! Figure 2: Keynes’s AD-AS Model (Image normally goes here) Part 1:Changes in which factors could cause aggregate demand to shift from AD to AD1? What could happen to the unemployment rate? What could happen to the inflation rate? Part 2: The Keynesian AD-AS model describes what happens with price levels when aggregate demand increases. Could you find any evidence from the last ten-fifteen years that might support AD-AS model descriptions of demand-pull inflation, cost-push inflation, and recession? For example, you could find data on the GDP’s of any two countries from 2000 to 2017 to support your findings. Please note the followong for the next 3 parts of this. In macroeconomics, the immediate short run is known as a length of time when both input prices and output prices are fixed. In the short-run, input prices are fixed but output prices are variable. In…arrow_forwardSuppose that the short-run aggregate supply curve is: π= 2 + 1.5 (Y-10), where it is inflation and Y is output; and the aggregate demand curve is: Y= 11 -0.5. Find the equilibrium output and the equilibrium inflation rate.arrow_forward
- Use aggregate supply and demand diagrams to explain what would happen to GDP and inflation in the following circumstances: ( Hint: Draw AD/AS diagrams, label initial curves D0 and S0, then draw new curve(s) reflecting the shifts indicated below and then interpret, what are new price levels and output levels relative to starting point. Be sure you know what factors shifts ADs and AS before attempting problems) a)Consumers decide to cut back their savings and buy more household appliances. b)Tornadoes destroy many factories in the country, while a severe drought ruins many crops. c)New technological developments raise productivity in manufacturing. d) Suppose Government concerned about mounting deficits drastically cuts government transfers and spending programs (Hint: AD has four components (Consumption, Private Investment, Government Spending, and Net Trade) 2. Is it more likely that aggregate supply or aggregate demand is shifting if: a)inflation and output move in the…arrow_forwardQ10arrow_forwardComplete the sentences with the correct term. Some options can be used more than once, and some may not be used at all. Cost-push inflation occurs when decreases until equilibrium output falls below the full employment level. Answer Bank As a result, the increases. aggregate price level One possible cause of cost-push inflation is an increase in imports cost of inputs To combat falling aggregate output, the government may introduce policies to increase short-run aggregate supply to where it and short-run aggregate supply intersect aggregate output at the same point. cost-push inflation These policies cause to return to its full employment level, aggregate demand long-run aggregate supply and the increases even further.arrow_forward
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