Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 29, Problem 2IAPA
To determine
To explain:
The effects on
To determine
To explain:
The effects on aggregate supply if the price level is increased.
To determine
To explain:
The effects on aggregate supply if the potential
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Students have asked these similar questions
The following table lists several determinants of aggregate supply. Fill in the table by indicating the changes in the determinants necessary to increase
aggregate supply.
Determinant
Prices of Nonlabor Inputs
Productivity
Nominal Wage Rate
Change Needed to Increase Short-Run Aggregate Supply
What effect will each shift have on price levels and quantities?
Decrease in Aggregate Demand
Decrease in Aggregate Supply
If aggregate supply is vertical, then which of the following statements must be true?
Aggregate demand does not affect the quantity of output.
Inflation creates greater social benefits.
Inflation will accompany any rise in output.
Aggregate demand does not cause inflationary changes in price level.
Chapter 29 Solutions
Foundations of Economics (8th Edition)
Ch. 29 - Prob. 1SPPACh. 29 - Prob. 2SPPACh. 29 - Prob. 3SPPACh. 29 - Prob. 4SPPACh. 29 - Prob. 5SPPACh. 29 - Prob. 6SPPACh. 29 - Prob. 7SPPACh. 29 - Prob. 8SPPACh. 29 - Prob. 9SPPACh. 29 - Prob. 10SPPA
Ch. 29 - Prob. 11SPPACh. 29 - Prob. 1IAPACh. 29 - Prob. 2IAPACh. 29 - Prob. 3IAPACh. 29 - Prob. 4IAPACh. 29 - Prob. 5IAPACh. 29 - Prob. 6IAPACh. 29 - Prob. 7IAPACh. 29 - Prob. 8IAPACh. 29 - Prob. 9IAPACh. 29 - Prob. 10IAPACh. 29 - Prob. 1MCQCh. 29 - Prob. 2MCQCh. 29 - Prob. 3MCQCh. 29 - Prob. 4MCQCh. 29 - Prob. 5MCQCh. 29 - Prob. 6MCQCh. 29 - Prob. 7MCQ
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- The following event has occurred in the history of the United States: The world oil price rises sharply. Explain for event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.arrow_forwardin economics, what are the following ⦁ the aggregate supply (AS) curve in the immediate short run. ⦁ the aggregate supply (AS) curve in the short run. ⦁ the aggregate supply (AS) in the long run.arrow_forwardIllustrate graphically and interpret the change in equilibrium price and quantity using short-run Aggregate Demand and Supply curve when: Prices of raw materials of suppliers increase. The Federal Bank increases the interest rate. Government decides to spend less on development of infrastructure of the country. New skilled workers join the workforce. Factories and plant got destroyed due to outbreak of fire.arrow_forward
- What kind of change would happen to aggregate demand, aggregate supply, and real GDP. if foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes.arrow_forwardThe following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 180. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 180, but the actual price level turns out to be 240. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 380 300 240 180 80 0 3 SRAS[180] 9 12 REAL GDP (Trillions of dollars) 15 18 0 SRAS[180] 0arrow_forwardThe computer industry developed a new technology that reduces the number of resources used to build new laptops per unit of labor. Illustrate what occurs to the aggregate supply curve by shifting it in the appropriate direction. Provide your answer below: Aggregate Supply! Price Level Aggregate Demand Real GDParrow_forward
- PRICE LEVEL 200 175 150 100 30 25 50 LOO 150 200 250 +- SRAS1 SRAS₂ 300 350 400 REAL GDP (Billions of dollars)arrow_forwardThe following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 240 200 160 40 0 0 3 SRAS[120] 6 9 12 REAL GDP (Trillions of dollars) 15 18 SRAS[120] 0 (?) Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph:arrow_forwardIn the long-run, aggregate supply is a horizontal line at the long-run price level people can afford. True False One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption. True Falsearrow_forward
- The aggregate supply curve of an economy is depicted by AS, in the graph to the right. Point B on the AS curve is most likely to depict the case in which firms are operating with excess capacity. Point A on the AS curve is most likely to depict the case in which firms are operating at the full-employment level. Price Level (P) Aggregate Supply Curve B U D ****** Real GDP (Y) ASO A Barrow_forwardIf the aggregate demand is 300 + 50P and the aggregate supply is 100 + 60P calculate the value of Parrow_forwardDescribe the change in aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (In your answer, indicate whether the change will "Decrease" or "Increase" aggregate supply or have no effect.) (a) A rise in the average price of inputs; (b) An increase in worker productivity; (c) Government antipollution regulations become stricter; (d) A new subsidy program is enacted for new business investment in productive equipment; (e) Energy prices decline.arrow_forward
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