Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 18, Problem 2WNG
To determine
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Is the following statement TRUE or FALSE? Please provide reason for the answer.
A fall in the price level shifts the aggregate supply curve upward and decreases the quantity of real GDP supplied.
The curve of Aggregate Demand or aggregate demand has a negative slope. Explain why the aggregate demand curve can have a negative slope.
If aggregate supply is vertical, then which of the following statements must be true?
Aggregate demand does not affect the quantity of output.
Inflation creates greater social benefits.
Inflation will accompany any rise in output.
Aggregate demand does not cause inflationary changes in price level.
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- "The demand curves for all products have negative slopes. For instance, the demand curves for milk,automobiles, personal computers, and shirts all have negative slopes. Therefore, because the aggregate demand curve shows the demand for all products, it too must have a negative slope. " Comment on this assertion.arrow_forwardIllustrate graphically and interpret the change in equilibrium price and quantity using short-run Aggregate Demand and Supply curve when: Prices of raw materials of suppliers increase. The Federal Bank increases the interest rate. Government decides to spend less on development of infrastructure of the country. New skilled workers join the workforce. Factories and plant got destroyed due to outbreak of fire.arrow_forwardWhich of the following statements best describes the aggregate supply curve? A) The aggregate supply curve represents the relationship between the price level and the total output or real GDP in the macroeconomy. B) The aggregate supply curve represents the relationship between the inflation rate and the total output or real GDP in the macroeconomy. C) The aggregate supply curve represents the relationship between the inflation rate and the total demand or real GDP in the macroeconomy. D) The aggregate supply curve represents the relationship between the price level and the potential output or GDP in the macroeconomy.arrow_forward
- (Figure: Determining SRAS Shifts) If there are advances in technology, the short-run aggregate supply curve will shift from SRAS to and the price level will shift to Aggregate Price Level (P) P₂ Po Q SRAS2; P1 SRAS1; P1 SRAS2; P2 SRAS1; PO SRAS2 Q₂ Qo Q₁ Aggregate Output (Q) SRASO AD SRAS₁arrow_forwardWhat kind of change would happen to aggregate demand, aggregate supply, and real GDP. if foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes.arrow_forwardIs the following statement TRUE or FALSE? Please provide reason for the answer. The aggregate supply curve is shifted rightward by an increase in tax rates.arrow_forward
- Suppose our economy is in macroeconomic equilibrium (also called "general equilibrium") with an upward-sloping aggregate supply curve and a downward-sloping aggregate demand curve. An increase in aggregate demand will: Question 5 options: a) Increase aggregate supply. b) Decrease the price level. c) Causes the aggregate supply to shift to the right. d) Increase real GDP. e) Reduce the number of discouraged workers in the unemployment rate.arrow_forwardThe following table lists several determinants of aggregate supply. Fill in the table by indicating the changes in the determinants necessary to increase aggregate supply. Determinant Prices of Nonlabor Inputs Productivity Nominal Wage Rate Change Needed to Increase Short-Run Aggregate Supplyarrow_forwardDescribe the change in aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (In your answer, indicate whether the change will "Decrease" or "Increase" aggregate supply or have no effect.) (a) A rise in the average price of inputs; (b) An increase in worker productivity; (c) Government antipollution regulations become stricter; (d) A new subsidy program is enacted for new business investment in productive equipment; (e) Energy prices decline.arrow_forward
- In the long-run, aggregate supply is a horizontal line at the long-run price level people can afford. True False One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption. True Falsearrow_forwardLike the supply curve for individual goods and services, the aggregate supply curve slopes upward and to the right.True or Falsearrow_forwardIf the aggregate demand is 300 + 50P and the aggregate supply is 100 + 60P calculate the value of Parrow_forward
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