Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 16, Problem 15QP
To determine
Whether the economy is in long run or not.
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Discuss the short-run tradeoff between inflation and unemployment.
Give two specific reasons why inflation in Canada is higher than normal.
An economy's aggregate demand curve (the relationship between short-run equilibrium output and inflation) is described by the equation:Y = 15,000 - 12,000π, where π is the inflation rate. Initially, the inflation rate is 2 percent or π = 0.02. Potential output Yp equals 14,640.Note: Keep as much precision as possible during your calculations. Your final answer for inflation should be accurate to at least two decimal places and output should be accurate to the nearest whole number.a) Find inflation and output in short-run equilibrium.
Inflation : 0%Output : $0
b) Find inflation and output in long-run equilibrium.
Inflation : 0%Output : $0
Chapter 16 Solutions
Macroeconomics
Ch. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.3 - Prob. 1STCh. 16.3 - Prob. 2STCh. 16.3 - Prob. 3STCh. 16.5 - Prob. 1STCh. 16.5 - Prob. 2STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QP
Ch. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNGCh. 16 - Prob. 4WNGCh. 16 - Prob. 5WNG
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- Suppose that your economy is in long run equilibrium. The aggregate demand and aggregate supply in the market is represented by the following functions: AD:= 360 – 4Y AS: P = 20 + 4Y Something occurs in the economy and the aggregate demand changes to: AD: P = 400 – 4Y Calculate the inflation rate that occurs with the change in aggregate demand.arrow_forwardQ10arrow_forwardQ2. If output falls, what is likely to happen to inflation and employment?arrow_forward
- According to Friedman, in which of the following situations is the economy in long-run equilibrium? a. The expected economic growth rate is 3 percent and the actual inflation rate is 3 percent. b. The average inflation rate over the past five years is 2 percent and the expected inflation rate is 2 percent. c. The expected inflation rate is 3 percent and the actual inflation rate is 3 percent. d. The expected economic growth rate is 2 percent and the expected inflation rate is 2 percent.arrow_forwardExplain three implications of increasing inflation.arrow_forwardWhy is inflation a macroeconomic problem? Why can't an inflation rate of 0% be achieved?arrow_forward
- Suppose an economy has a high rate of unemployment and a high rate of inflation. What kind of policy measures would you suggest to fight inflation and increase employment?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_forwardEcon 2 2022- 2b: How would you expect a decrease in Aggregate Demand to affect both inflation and real GDP? Under what conditions would you expect a decrease in AD to have a bigger effect on inflation than real GDP?arrow_forward
- Suppose 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_forwardAccording to the Keynesian model, demand shocks affect output in the short run because: nominal wages are sticky. employment can be adjusted quickly. real wages do not change as inflation changes. None of the above.arrow_forwardThe AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3% per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?arrow_forward
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