Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities. The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression. Causes of Recession: Below given are the causes of recession: Rise in oil price : When the price of oil increases the prices of every commodities rises due to increase in input cost . Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition. Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible. Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level. To explain: Reason for rise in gas prices during recession and fall in prices after recession.

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Answer 1

Question

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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Short Description Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS and AD1 intersect at (280, 85) a. How much does aggregate demand need to change to restore the…

Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 1000 billion dollars with an increment of 50 billion dollars, and the y-axis is scaled from 0 to 180 units with an increment of 10 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (200, 40)Point 2 at (800, 160)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (200, 160)Point 2 at (800, 40)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (350, 170)Point 2 at (900, 60)A vertical Long-run Aggregate Supply, LRAS line with two endpoints:Point 1 at (500, 170)Point 2 at (500, 0)Two Reference Points:Lines AS and AD1 intersect at (600, 120)Lines AS, AD, and LRAS intersect at (500, 100) a. How much does aggregate demand need to change to restore the…

a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.95. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.

Answer 2

Question

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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Answer 3

Question

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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Answer 4

Question

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

Answer 6

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

Answer 7

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Answer 8

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 12 - Prob. 1QFT Ch. 12 - Prob. 2QFT Ch. 12 - Prob. 3QFT Ch. 12 - Prob. 1P Ch. 12 - Prob. 2P Ch. 12 - Prob. 3P Ch. 12 - Prob. 4P Ch. 12 - Prob. 5P Ch. 12 - Prob. 6P Ch. 12 - Prob. 7P

Explanation of Solution

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