The reason for shift in long-run aggregate demand and supply curves during Great Recession.

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Answer 1

Question

Chapter 27, Problem 1QFR

To determine

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Expert Solution & Answer

Explanation of Solution

During Great Recession, undoubtedly long-run aggregate demand falls which causes this curve to shift leftward. Similarly, the long-run aggregate supply also falls causing this curve shifts leftward. Behind this there are of course some causes. These are as follows:

Causes of shift of long run aggregate demand curve are explained below:

Higher interest rates: It reduces borrowing and investment level.
Fall in real wages:Real wages falls in the form of cutting wages by firms as inflation rate erodes real wages value.
Fall in consumer confidence:This is in the form of negative sequence of events causing delay in consumer spending. Lesser confidence minimizes investment in business too.
Credit crunch: This causes a fall in advancing loans by banks and consequently lesser investment.
A period of deflation. Reducing price levels often inspire people for delayed spending. Besides, deflation adds the actual value of debt more which results in worse off situation of the debtors.
Exchange rate appreciation:This makes exports more costly and finally decreases export demand.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 1.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 1

Figure 1

Cause of shift of long run aggregate supply curve is explained below:

Rise in oil prices: Oil price hike is the only main reason forleftward shift of long run aggregate supply curve. This leads to high production cost and ultimately collective supply in the economy to decline.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 2.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 2

Figure 2

Economics Concept Introduction

Great Recession:

Great Recession is the term that represents the rapid downfall of economic activities in world economy towards last of 2000s. The magnitude and consequent harm of recession were distinct in different countries.The developed countries like North America and Europe were affected a lot and developing countries like India and China faced development in their economy.

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Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Chapter 27, Problem 1QFR

To determine

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Expert Solution & Answer

Explanation of Solution

During Great Recession, undoubtedly long-run aggregate demand falls which causes this curve to shift leftward. Similarly, the long-run aggregate supply also falls causing this curve shifts leftward. Behind this there are of course some causes. These are as follows:

Causes of shift of long run aggregate demand curve are explained below:

Higher interest rates: It reduces borrowing and investment level.
Fall in real wages:Real wages falls in the form of cutting wages by firms as inflation rate erodes real wages value.
Fall in consumer confidence:This is in the form of negative sequence of events causing delay in consumer spending. Lesser confidence minimizes investment in business too.
Credit crunch: This causes a fall in advancing loans by banks and consequently lesser investment.
A period of deflation. Reducing price levels often inspire people for delayed spending. Besides, deflation adds the actual value of debt more which results in worse off situation of the debtors.
Exchange rate appreciation:This makes exports more costly and finally decreases export demand.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 1.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 1

Figure 1

Cause of shift of long run aggregate supply curve is explained below:

Rise in oil prices: Oil price hike is the only main reason forleftward shift of long run aggregate supply curve. This leads to high production cost and ultimately collective supply in the economy to decline.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 2.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 2

Figure 2

Economics Concept Introduction

Great Recession:

Great Recession is the term that represents the rapid downfall of economic activities in world economy towards last of 2000s. The magnitude and consequent harm of recession were distinct in different countries.The developed countries like North America and Europe were affected a lot and developing countries like India and China faced development in their economy.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 27, Problem 1QFR

To determine

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Expert Solution & Answer

Explanation of Solution

During Great Recession, undoubtedly long-run aggregate demand falls which causes this curve to shift leftward. Similarly, the long-run aggregate supply also falls causing this curve shifts leftward. Behind this there are of course some causes. These are as follows:

Causes of shift of long run aggregate demand curve are explained below:

Higher interest rates: It reduces borrowing and investment level.
Fall in real wages:Real wages falls in the form of cutting wages by firms as inflation rate erodes real wages value.
Fall in consumer confidence:This is in the form of negative sequence of events causing delay in consumer spending. Lesser confidence minimizes investment in business too.
Credit crunch: This causes a fall in advancing loans by banks and consequently lesser investment.
A period of deflation. Reducing price levels often inspire people for delayed spending. Besides, deflation adds the actual value of debt more which results in worse off situation of the debtors.
Exchange rate appreciation:This makes exports more costly and finally decreases export demand.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 1.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 1

Figure 1

Cause of shift of long run aggregate supply curve is explained below:

Rise in oil prices: Oil price hike is the only main reason forleftward shift of long run aggregate supply curve. This leads to high production cost and ultimately collective supply in the economy to decline.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 2.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 2

Figure 2

Economics Concept Introduction

Great Recession:

Great Recession is the term that represents the rapid downfall of economic activities in world economy towards last of 2000s. The magnitude and consequent harm of recession were distinct in different countries.The developed countries like North America and Europe were affected a lot and developing countries like India and China faced development in their economy.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 27, Problem 1QFR

To determine

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Expert Solution & Answer

Explanation of Solution

During Great Recession, undoubtedly long-run aggregate demand falls which causes this curve to shift leftward. Similarly, the long-run aggregate supply also falls causing this curve shifts leftward. Behind this there are of course some causes. These are as follows:

Causes of shift of long run aggregate demand curve are explained below:

Higher interest rates: It reduces borrowing and investment level.
Fall in real wages:Real wages falls in the form of cutting wages by firms as inflation rate erodes real wages value.
Fall in consumer confidence:This is in the form of negative sequence of events causing delay in consumer spending. Lesser confidence minimizes investment in business too.
Credit crunch: This causes a fall in advancing loans by banks and consequently lesser investment.
A period of deflation. Reducing price levels often inspire people for delayed spending. Besides, deflation adds the actual value of debt more which results in worse off situation of the debtors.
Exchange rate appreciation:This makes exports more costly and finally decreases export demand.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 1.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 1

Figure 1

Cause of shift of long run aggregate supply curve is explained below:

Rise in oil prices: Oil price hike is the only main reason forleftward shift of long run aggregate supply curve. This leads to high production cost and ultimately collective supply in the economy to decline.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 2.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 2

Figure 2

Economics Concept Introduction

Great Recession:

Great Recession is the term that represents the rapid downfall of economic activities in world economy towards last of 2000s. The magnitude and consequent harm of recession were distinct in different countries.The developed countries like North America and Europe were affected a lot and developing countries like India and China faced development in their economy.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 27, Problem 1QFR

To determine

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Expert Solution & Answer

Explanation of Solution

During Great Recession, undoubtedly long-run aggregate demand falls which causes this curve to shift leftward. Similarly, the long-run aggregate supply also falls causing this curve shifts leftward. Behind this there are of course some causes. These are as follows:

Causes of shift of long run aggregate demand curve are explained below:

Higher interest rates: It reduces borrowing and investment level.
Fall in real wages:Real wages falls in the form of cutting wages by firms as inflation rate erodes real wages value.
Fall in consumer confidence:This is in the form of negative sequence of events causing delay in consumer spending. Lesser confidence minimizes investment in business too.
Credit crunch: This causes a fall in advancing loans by banks and consequently lesser investment.
A period of deflation. Reducing price levels often inspire people for delayed spending. Besides, deflation adds the actual value of debt more which results in worse off situation of the debtors.
Exchange rate appreciation:This makes exports more costly and finally decreases export demand.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 1.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 1

Figure 1

Cause of shift of long run aggregate supply curve is explained below:

Rise in oil prices: Oil price hike is the only main reason forleftward shift of long run aggregate supply curve. This leads to high production cost and ultimately collective supply in the economy to decline.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 2.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 2

Figure 2

Economics Concept Introduction

Great Recession:

Great Recession is the term that represents the rapid downfall of economic activities in world economy towards last of 2000s. The magnitude and consequent harm of recession were distinct in different countries.The developed countries like North America and Europe were affected a lot and developing countries like India and China faced development in their economy.

Answer 6

Chapter 27, Problem 1QFR

To determine

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Expert Solution & Answer

Explanation of Solution

During Great Recession, undoubtedly long-run aggregate demand falls which causes this curve to shift leftward. Similarly, the long-run aggregate supply also falls causing this curve shifts leftward. Behind this there are of course some causes. These are as follows:

Causes of shift of long run aggregate demand curve are explained below:

Higher interest rates: It reduces borrowing and investment level.
Fall in real wages:Real wages falls in the form of cutting wages by firms as inflation rate erodes real wages value.
Fall in consumer confidence:This is in the form of negative sequence of events causing delay in consumer spending. Lesser confidence minimizes investment in business too.
Credit crunch: This causes a fall in advancing loans by banks and consequently lesser investment.
A period of deflation. Reducing price levels often inspire people for delayed spending. Besides, deflation adds the actual value of debt more which results in worse off situation of the debtors.
Exchange rate appreciation:This makes exports more costly and finally decreases export demand.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 1.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 1

Figure 1

Cause of shift of long run aggregate supply curve is explained below:

Rise in oil prices: Oil price hike is the only main reason forleftward shift of long run aggregate supply curve. This leads to high production cost and ultimately collective supply in the economy to decline.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 2.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 2

Figure 2

Economics Concept Introduction

Great Recession:

Great Recession is the term that represents the rapid downfall of economic activities in world economy towards last of 2000s. The magnitude and consequent harm of recession were distinct in different countries.The developed countries like North America and Europe were affected a lot and developing countries like India and China faced development in their economy.

Answer 7

Chapter 27, Problem 1QFR

To determine

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Answer 8

Expert Solution & Answer

Explanation of Solution

During Great Recession, undoubtedly long-run aggregate demand falls which causes this curve to shift leftward. Similarly, the long-run aggregate supply also falls causing this curve shifts leftward. Behind this there are of course some causes. These are as follows:

Causes of shift of long run aggregate demand curve are explained below:

Higher interest rates: It reduces borrowing and investment level.
Fall in real wages:Real wages falls in the form of cutting wages by firms as inflation rate erodes real wages value.
Fall in consumer confidence:This is in the form of negative sequence of events causing delay in consumer spending. Lesser confidence minimizes investment in business too.
Credit crunch: This causes a fall in advancing loans by banks and consequently lesser investment.
A period of deflation. Reducing price levels often inspire people for delayed spending. Besides, deflation adds the actual value of debt more which results in worse off situation of the debtors.
Exchange rate appreciation:This makes exports more costly and finally decreases export demand.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 1.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 1

Figure 1

Cause of shift of long run aggregate supply curve is explained below:

Rise in oil prices: Oil price hike is the only main reason forleftward shift of long run aggregate supply curve. This leads to high production cost and ultimately collective supply in the economy to decline.

The situation of leftward shift of aggregate demand is shown diagrammatically on Figure 2.

Principles of Economics (Second Edition), Chapter 27, Problem 1QFR , additional homework tip 2

Figure 2

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Great Recession:

Great Recession is the term that represents the rapid downfall of economic activities in world economy towards last of 2000s. The magnitude and consequent harm of recession were distinct in different countries.The developed countries like North America and Europe were affected a lot and developing countries like India and China faced development in their economy.

Answer 12

Ch. 27 - Prob. 1QFR Ch. 27 - Prob. 2QFR Ch. 27 - Prob. 3QFR Ch. 27 - Prob. 4QFR Ch. 27 - Prob. 5QFR Ch. 27 - Prob. 6QFR

The reason for shift in long-run aggregate demand and supply curves during Great Recession.

To explain: The reason for shift in long-run aggregate demand and supply curves during Great Recession.

Explanation of Solution

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Chapter 27 Solutions

To explain:

The reason for shift in long-run aggregate demand and supply curves during Great Recession.