Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 20.A, Problem 12SQ
To determine
The intersection of the AD and the short run
Expert Solution & Answer
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Students have asked these similar questions
5. AD; SRAS; LRAS; Short-run equilibrium; Long-run equilibrium; Recessionary gap and
Inflationary gap. Consider diagram below to answer the following questions:
LRAS
SRAS
`AD1
Q1
Real GDP
(a) – Use Point 1 and Point 2 to explain the difference between the short-run equilibrium and the
long-run equilibrium.
(b) - The economy is currently producing Qi. At this level of Real GDP, the economy is in
a(n)_
. (recessionary gap or inflationary gap). Select one.
(c) - The unemployment rate is lower at
than
- (Q:/QN, QN/ Q1). Select one.
(d) – At QN, cyclical unemployment (Uc) is
(positive, negative, zero). Select one.
Price Level
16
Suppose the economy experiences a "supply shock" due to a fall in oil prices. As a result, the economy experiences a/an ___________in the price level and a/an _______in the level of output(GDP)
Group of answer choices
Decrease; decrease
Increase; increase
Decrease; increase
Increase; decreas
Chapter 20 Solutions
Economics For Today
Ch. 20.7 - Prob. 1YTECh. 20.A - Prob. 1SQPCh. 20.A - Prob. 2SQPCh. 20.A - Prob. 3SQPCh. 20.A - Prob. 4SQPCh. 20.A - Prob. 5SQPCh. 20.A - Prob. 6SQPCh. 20.A - Prob. 1SQCh. 20.A - Prob. 2SQCh. 20.A - Prob. 3SQ
Ch. 20.A - Prob. 4SQCh. 20.A - Prob. 5SQCh. 20.A - Prob. 6SQCh. 20.A - Prob. 7SQCh. 20.A - Prob. 8SQCh. 20.A - Prob. 9SQCh. 20.A - Prob. 10SQCh. 20.A - Prob. 11SQCh. 20.A - Prob. 12SQCh. 20.A - Prob. 13SQCh. 20.A - Prob. 14SQCh. 20.A - Prob. 15SQCh. 20.A - Prob. 16SQCh. 20.A - Prob. 17SQCh. 20.A - Prob. 18SQCh. 20.A - Prob. 19SQCh. 20.A - Prob. 20SQCh. 20 - Prob. 1SQPCh. 20 - Prob. 2SQPCh. 20 - Prob. 3SQPCh. 20 - Prob. 4SQPCh. 20 - Prob. 5SQPCh. 20 - Prob. 6SQPCh. 20 - Prob. 7SQPCh. 20 - Prob. 8SQPCh. 20 - Prob. 9SQPCh. 20 - Prob. 10SQPCh. 20 - Prob. 11SQPCh. 20 - Prob. 1SQCh. 20 - Prob. 2SQCh. 20 - Prob. 3SQCh. 20 - Prob. 4SQCh. 20 - Prob. 5SQCh. 20 - Prob. 6SQCh. 20 - Prob. 7SQCh. 20 - Prob. 8SQCh. 20 - Prob. 9SQCh. 20 - Prob. 10SQCh. 20 - Prob. 11SQCh. 20 - Prob. 12SQCh. 20 - Prob. 13SQCh. 20 - Prob. 14SQCh. 20 - Prob. 15SQCh. 20 - Prob. 16SQCh. 20 - Prob. 17SQCh. 20 - Prob. 18SQCh. 20 - Prob. 19SQCh. 20 - Prob. 20SQ
Knowledge Booster
Similar questions
- Pessimism (suggestion: draw the AS-AD diagram to help your analysis and start with the long-run and short-run equilibrium, i.e. the intersection of LRAS, SRAS and AD curves) Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time. Refer to Pessimism. In the short run what happens to the price level and real GDP? O 1) Both the price level and real GDP rise. 2) Both the price level and real GDP fall. 3) The price level rises and real GDP falls. 4) The price level falls and real GDP rises.arrow_forwardprice level LRAS SRAS1 SRAS2 D Refer to the above Figure. If the economy is AD1 AD2 quantity of output at A and there is a stock market crash, in the short run the economy 1) stays at A. 2) moves to B. 3) moves to C. 4) moves to D.arrow_forwardQuestion 6 Suppose that an economy is currently in its long run equilibrium. Suppose that the government decides to increases government spending. Being concerned about the budget implications, it also raises the income tax rate to maintain a balanced budget. Using the AD- AS model, explain the impact of this policy on the economy in the: A. Short Run B. Long Runarrow_forward
- Consumption $550 Investment $200 Exports $60 Imports $90 Government Spending $100 Taxes $70 Potential Real Output (Long run Real Output) $800 The above macroeconomic data are from the economy in 2019. Dollar values are measured in billions of 2019 dollars. (a) Is the economy facing a recessionary gap, an inflationary gap, or neither? Explain using numbers. (b) Based on your answer to part (a), how will the economy adjust in the long run in the absence of any government policy action? Explain.arrow_forwardDescribe what the effect on aggregate demand would be, other things being equal, if exports increase. both imports and exports decrease. consumption decreases. investment increases. investment decreases and government purchases increase. the price level increases. the price level decreases.arrow_forwardWhich of the following would NOT cause a shift in AD? Select one: a. A reduction in interest rates b. A fall in the cost of production c. A reduction in income tax d. An increase in government spendingarrow_forward
- 11 Exhibit 3-1 PL P SRAS LRAS AD Y Y* GDPR Refer to Exhibit 3-1. The economy is currently producing at level Y. If an economist believes the economy (itself) can move to Y*, then he believes that the economy will likely stay "stuck" in short-run equilibrium. SRAS curve will shift rightward and intersect the AD curve. O AD curve will shift rightward and intersect the SRAS curve. LRAS curve will shift leftward until it intersects the SRAS and AD curves at Y.arrow_forwardWhich items describe long-run aggregate supply (LRAS), and which ones describe short-run aggregate supply (SRAS)? Long-Run Aggregate Supply The unemployment rate, u, may be above or below the natural rate. Unemployment is at the natural rate, u*. All prices can change. Short-Run Aggregate Supply + Only some prices can change. The economy's output may be above or below the full-employment level, Y*. The economy's output, Y, is at the full- employment level.arrow_forwardFigure: Inflationary and Recessionary Gaps Price level P₂ P₂ P₁ Panel (a) LRAS SRAS Y, Y Real GDP AD Price level P₂ P₂ P₁ Panel (b) LRAS YY₁ Real GDP SRAS AD Refer to Figure: Inflationary and Recessionary Gaps. If the economy is in short-run equilibrium at Y, in panel (a), the economy is in: full employment. a recessionary gap. an inflationary gap. simultaneous short-run and long-run equilibrium.arrow_forward
- During the 1930s the U.S. entered the Great Depression. During the Great depression investment fell from a yearly rate of $16.7 billion to $1.7 billion. In 1932, President Hoover increased income taxes. Assume the MPC is .92 C). If the AD shortfall in 1934 was $300 billion, what change in government expenditures on goods and services (G) would you have recommended to restore full-employment? D). If the AD shortfall in 1934 was $300 billion, what change in income/transfer payments would you have recommended ? E). If the AD shortfall in 1934 was $300 billion, what change in income taxes would you have recommended ?arrow_forwardFollowing a demand-side recession, what happens to full employment GDP (C+I+G) after a few recessions and over-expansion? Why is this composition problematic for the long run?arrow_forwardUsing the aggregate demand and aggregate supply (AD-AS) diagram, explain what will happen to the equilibrium price level and Real GDP when each of the following events occurs: 3. (i) A technological advancement in agricultural sector. (ii) The Malaysian government's economic stimulus package of RM8 billion. (ii) An appreciation of Ringgit Malaysian (RM). (iv) An increase in labour productivity. (v) An increase in wage rates. (vi) An increase in higher educated labour force. (vii) Households expected lower future prices. (viii) An adverse supply shock.arrow_forward
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