Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 26, Problem 21P
Use Table 26.3 to answer the following questions.
- Sketch an aggregate supply and aggregate demand diagram.
- What is the equilibrium output and
price level? - If aggregate demand shifts right, what is equilibrium output?
- If aggregate demand shifts left, what is equilibrium output?
- In this scenario, would you suggest using aggregate demand to alter the level of output or to control any inflationary increases in the price level?
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Are the determinants of aggregate demand the same things that apply to demand for an individual good?
Use the following graph to answer the following questions.
Line Y
Price level
(P)
100
80
B
Line Z
Line X2
Line X1
Real GDP
(3)
If point A occurs chronologically before point B, then this graph could represent
a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply.
a decrease in aggregate demand with constant long-run and short-run aggregate supply.
constant aggregate demand with a decline in long-run aggregate supply.
an increase in aggregate demand with constant long-run and short-run aggregate supply.
constant aggregate demand with a decline in short-run aggregate supply.
The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion.
Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand.
Change required to increase AD
Expected rate of return on investment. (decrease/increase)
Incomes in other countries (decrease/increase)
Consumer expectations about future profitability. (improve/worsen)
Government spending (increase/decrease)
Chapter 26 Solutions
Principles of Economics 2e
Ch. 26 - Do rational expectations tend to look back at past...Ch. 26 - Legislation proposes that the government should...Ch. 26 - Would it make sense to argue that rational...Ch. 26 - Summarize the Keynesian and Neoclassical models.Ch. 26 - Does neoclassical economics focus on the long term...Ch. 26 - Does neoclassical economics view prices and wages...Ch. 26 - What shape is the long-nm aggregate supply curve?...Ch. 26 - What is the difference between rational...Ch. 26 - A neoclassical economist and a Keynesian economist...Ch. 26 - Do neoclassical economists tend to focus more on...
Ch. 26 - Do neoclassical economists tend to focus more on...Ch. 26 - Do neoclassical economists see a value in...Ch. 26 - If aggregate supply is vertical, what role does...Ch. 26 - What is the shape of the neoclassical long-run...Ch. 26 - When the economy is experiencing a recession, why...Ch. 26 - If the economy is suffering through a rampant...Ch. 26 - If most people have rational expectations, how...Ch. 26 - Explain why the neoclassical economists believe...Ch. 26 - Economists from all theoretical persuasions...Ch. 26 - Is it a logical contradiction to be a neoclassical...Ch. 26 - Use Table 26.3 to answer the following questions....
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