Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 20.A, Problem 13SQ
To determine
Implication of the GDP at the Y1 level.
Expert Solution & Answer
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MC Qu. 67 Refer to the graph shown. A....
Refer to the graph shown.
Output
Time
A trough will be arrived at when the economy moves from point
OB to point C
A to point B
C to point D
OB to point D
5) In the aggregate demand relation, a reduction in the price level causes output to increase because of
its effect on:
A) firms' markup over labour costs.
B) the nominal wage.
C) the interest rate.
D) the expected price level.
E) government spending.
Suppose that the economy of Monaco is represented by
the aggregate demand (AD), short-run aggregate supply
(SRAS), and long-run aggregate supply (LRAS) curves
in the accompanying graph.
a. Based on the graph, Monaco is
experiencing a deflationary gap.
currently at long-run equilibrium.
experiencing an inflationary gap.
b. Which of the following policies eliminate this
phenomenon?
A birth control subsidy
An increase government purchases of goods
and services
An increase in taxes
An increase in government transfers
A cut in taxes
c Suppose that the government implements the policy
proposed in part b. Shift the aggregate demand curve on
the graph accordingly.
Aggregate price level
LRAS
7
6
X
5
4
3
AD
2 3
10
9
8
2
1
0
0
1
4 5 6
Real GDP
7
8
SRAS
9 10
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
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- Why do consumers mostly gain little buying power during a deflation?arrow_forwardAssume the economy of Chile is in a long-run equilibrium with full employment. In the short run,nominal wages are fixed.1. Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply,and aggregate demand. Show each of the following.a. Equilibrium output, labeled Y1b. Equilibrium price level, labeled PL1 2. Assume that there is an increase in exports from Chile. On your graph in question 1,show the effect of higher exports on the equilibrium in the short run, labeling the newequilibrium output and price level Y2 and PL2, respectively.3. Based on your answer in part (b), what is the impact of higher exports on real wages inthe short run? Explain.4. As a result of the increase in exports, export-oriented industries in Chile increaseexpenditures on new container ships and equipment.a. What component of aggregate demand will change?b. What is the impact on the long-run aggregate supply? Explain.arrow_forwardSuppose firms become very optimistic about future business conditions and invest heavily in new capital equipment. (a) Draw an AD-AS diagram to show the short-run effect of this optimism on the economy. Label the new levels of prices and output. (b) Use the diagram from part (a) to show the new long-run equilibrium of the economy. Explain in words why how the new long-run equilibrium is achieved.arrow_forward
- Suppose that firms become very pessimistic about future business conditions and cut heavily on investment in capital equipment. Show the long-run equilibrium of the economy. Explain what happens to Price level and Quantity of Output in the long run equilibrium. Explain in words why the aggregate quantity of output demanded changes between the short run and the long run. [No policy involvement]arrow_forwardAssume that the economy is in a full employment equilibrium. There is an improvement in overall technology for all firms. The following combination of events are likely to occur a output rises, prices fall b output falls, prices rise . c output rises, prices rise d output falls, prices fallarrow_forwardAggregate Supply, and a New Equilibrium How will each of the following likely change the aggregate supply curve? Drag and drop options on the right-hand side and submit. For keyboard navigation... SHOW MORE ✓ Increase in the labor force. Increase in capital. Increase in the cost of raw materials. 7/20 answered Decrease in costs created by regulations. Increase in unemployment. = E = = = The aggregate supply curve shifts to the right. The aggregate supply curve shifts to the right. The aggregate supply curve shifts to the right. The aggregate supply curve does not move but there is movement along the curve. The aggregate supply curve shifts to the left. The aggregate supply curve shifts to the left. The aggregate supply curve does not move but there is movement along the curve.arrow_forward
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