Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242500
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 22, Problem 8PA
Sub part (a):
To determine
The changes in aggregate supply and demand on aggregate supply curve , aggregate demand curve, and Phillips curve .
Sub part (b):
To determine
The changes in aggregate supply and demand on aggregate supply curve, aggregate demand curve, and Phillips curve.
Sub part (c):
To determine
The changes in aggregate supply and demand on aggregate supply curve, aggregate demand curve, and Phillips curve.
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As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand
caused by the housing and financial crises and a decrease in short-run aggregate supply caused by
rising commodity prices.
Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate
supply and aggregate demand on the following graph. Then, on the subsequent graph, indicate
what happens on a Phillips-curve diagram.
LRAS
Aggregate Supply
Aggregate Demand
XE
0
LRPC
SRPC
Unemployment Rate
Price Level
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Aggregate Demand
Equilibrium output will rise.
The effect on the inflation rate will be ambiguous.
The price level will fall.
Unemployment will rise.
Aggregate Supply
LRAS
Long-Run Equilibrium
SRPC
LRPC
Long-Run Equilibrium
(?)
Which of the following is true as a result of the two changes in aggregate demand and aggregate
supply? (Note: Do not consider the magnitudes of the shifts given on the preceding graphs. Think
only about the…
As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices.
1. Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph. Then, on the subsequent graph, indicate what happens on a Phillips-curve diagram. (Please use the images attached.)
2. Which of the following is true as a result of the two changes in aggregate demand and aggregate supply? (Note: Do not consider the magnitudes of the shifts given on the preceding graphs. Think only about the directions of the shifts.) Check all that apply.
-Equilibrium output will rise.
-The price level will fall.
-Unemployment will rise.
-The effect on the inflation rate will be ambiguous.
Aggregate demand, aggregate supply, and the Phillips curve
In the year 2027, aggregate demand and aggregate supply in the imaginary country of Daisen-Oki are represented by the curves AD 2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled AD(a) curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled AD(b), resulting in the outcome given by point B.
Suppose the unemployment rate is 7% under one of these two outcomes and 6% under the other. Based on the previous graph, you would expect (OUTCOME A or OUTCOME B) to be associated with the higher unemployment rate (7%).
If aggregate demand is high in 2028, and the economy is at outcome B, the inflation rate between 2027 and 2028 is (1.96% or 5.00% or 4.00% or 2.94%).
Based on your answers to the previous…
Chapter 22 Solutions
Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
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