Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 23, Problem 10PA
Sub part (a):
To determine
The impact of optimistic future expectations by the firms in the economy.
Sub part (b):
To determine
The impact of optimistic future expectations by the firms in the economy.
Sub part (c):
To determine
The impact of optimistic future expectations by the firms in the economy.
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Assume that the long-run aggregate supply curve is vertical at Y = 3.000 while the short-run aggregate supply curve is horizontal at P=1.0, . The aggregate demand curve is Y = 2(M / P) and M = 1,500.
Suppose the aggregate demand function shifts to Y = (1.5)(M / P) . What are the short- run values of P and Y? Show the change in short and long- run equilibrium graphically . Describe the short- run and long- run effects of the change in demand .
Suppose that firms become very pessimistic about future business conditions and cut heavily on investment in capital equipment. [Label A, B, C for the initial, new short-run and new long-run equilibrium respectively]
a)Use an aggregate-demand/aggregate-supply model to show the short-run effect of this pessimism on the economy. Label the new levels of prices and real output. Explain in words why the aggregate quantity of output supplied changes. (Use the sticky wage theory in your explanation)
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Chapter 23 Solutions
Essentials of Economics (MindTap Course List)
Ch. 23.1 - Prob. 1QQCh. 23.2 - Prob. 2QQCh. 23.3 - Prob. 3QQCh. 23.4 - Prob. 4QQCh. 23.5 - Prob. 5QQCh. 23 - Prob. 1CQQCh. 23 - Prob. 2CQQCh. 23 - Prob. 3CQQCh. 23 - Prob. 4CQQCh. 23 - Prob. 5CQQ
Ch. 23 - Prob. 6CQQCh. 23 - Prob. 1QRCh. 23 - Prob. 2QRCh. 23 - Prob. 3QRCh. 23 - Prob. 4QRCh. 23 - Prob. 5QRCh. 23 - Prob. 6QRCh. 23 - Prob. 7QRCh. 23 - Prob. 1PACh. 23 - Prob. 2PACh. 23 - Prob. 3PACh. 23 - Prob. 4PACh. 23 - Prob. 5PACh. 23 - Prob. 6PACh. 23 - Prob. 7PACh. 23 - Prob. 8PACh. 23 - Prob. 9PACh. 23 - Prob. 10PA
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