Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
8th Edition
ISBN: 9780134641843
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 28, Problem 2SPPA
To determine

To explain:

The impact on the quantity of money demanded and on the nominal interest rate in the short run if the Fed decides to cut the quantity of money.

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Refer to the attached Wk 3 Graph for this assignment. The graph shows an increase in demand (shifting of the demand curve from D1 to D2). Choose an application or situation in the economy or a specific economic situation to describe this graph. Take into consideration the impact on quantity and price in your analysis. Given your analysis, what would cause the situation to go the opposite way? What would cause the situation to go further into the same direction?
Click on the link to study the Economics in the News. Then answer the following questions. 120- 118- 3. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that occurred in 2016 and 2017 that brought the economy to its situation in mid-2017. The graph shows the U.S. economy in the second quarter of 2016. Draw and label the long-run aggregate supply curve in 2017. Draw and label the aggregate demand curve in 2017. Draw a point at the short-run macroeconomic equilibrium in the second quarter of 2017. 116- 114- ☑--- Price level (GDP deflator, 2009=100) LAS 16 112- 110- 108- 106- 104- 102- $16.7 100- 16.6 16.7 16.8 16.9 17.0 SAS 16 = SAS17 AD 16 17.1 17.2 17.3 Real GDP (trillions of 2009 dollars) >>> Draw only the objects specified in the question. LV ☑
Price level (GDP deflator, 2009=100) Fed Raises Rates As Job Gains, Firming Inflation Stoke Confidence The U.S. Federal Reserve raised interest rates on Wednesday. The rate rise was the second in three months. This second rise comes in an economy that is growing faster and creating jobs at a more rapid pace. These gains are accompanied by a rising inflation rate. 140- 130- Source: Reuters, March 15, 2017 Describe the process by which the Fed's action reported in the news clip flows through the economy. 120- ... 110- LAS SAS → ☑ When the Fed raises the interest rate, A. aggregate demand decreases and short-run aggregate supply increases, and the price level falls B. aggregate demand increases and real GDP increases C. aggregate demand decreases and the price level falls D. short-run aggregate supply increases and the price level falls The graph shows the long-run aggregate supply curve and the short-run aggregate supply curve. Draw the AD curve to illustrate the state of the economy…
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