Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 32, Problem 4.6P
Subpart (a):
To determine
The effect on
Subpart (b):
To determine
The effect on aggregate output and price level.
Subpart (c):
To determine
The effect on the aggregate output and price level.
Subpart (d):
To determine
The effect on aggregate output and price level.
Subpart (e):
To determine
The effect on aggregate output and price level.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks
charge consumers decreases, but producers are not affected. Which of the following is most likely to be
the equilibrium change?
Price
D.
Quantity
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
The equilibrium will be at point C before the change in expectations and point A after the
a
change
The equilibrium will be at point A before the change in expectations and point B after the
b
change
The equilibrium will be at point A before the change in expectations and point C after the
change
The equilibrium will be at point E before the change in expectations and point C after the
d
change
[3 Fulls
40
la
If a graph showed aggregate demand and short-run aggregate supply intersecting at $18 trillion of GDP, and the long-run aggregate supply curve was situated at $20 trillion of GDP, this would indicate that the economy was
Select one:
a.
at full employment.
b.
experiencing high inflation.
c.
in a recession.
d.
in an expansion.
Which of the following would shift aggregate demand to the right?
1) The value of the dollar increases.
2) There is a decline in consumer confidence.
3) Stock market values increase by 20%.
4) College graduates are having a difficult time finding jobs.
5) A fall in the price level increases the value of real wealth.
Chapter 32 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Also in year 2, the cost of lumber used to build homes decreases. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point B after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point E after the change d The equilibrium will be at point E before the change in expectations and point A after the changearrow_forwardWhich of the following is likely to result from a rapid rise in aggregate demand? Select one: a. Static living standards b. Increased unemployment c. Rising prices d. Surplus on the balance of paymentsarrow_forwardExplain what will happen as a result of the following events. In each case, draw an aggregate demand and short-run aggregate supply diagram showing the initial equilibrium output level (YO) and price level (PO). Show any changes, indicate the final equilibrium output level and price level and explain briefly. a. The economy is in a recession. An increase in government purchases occurs. The Fed tries to maintain the interest rate. b. The economy is operating near full capacity. Now environmental pollution standards are tightened substantially.arrow_forward
- Assume the economy is in long-run equilibrium in 2019. Use the Aggregate Demand and Aggregate Supply Model (AS-AD) to show and explain the impact of the following changes in 2020: a. The pandemic in 2020 leads to required government shutdowns of non-essential businesses which results in high unemployment. b. The federal government responds with the largest fiscal stimulus package in history (CARES Act) which provides additional unemployment insurance, stimulus checks and subsidies for business. C. The Federal Reserve uses monetary policy to cut interest rates to near zero to make borrowing cheaper. d. International flights into the US are limited, decreasing the number of foreign tourists visiting. e. What is the net impact of all four changes taken together?arrow_forwardWhich of the following scenarios would result in a decrease in Aggregate Demand? A) The congress passes a new income tax cut. B) A rise in imports from Europe C) A decline in investors confidence causes investment to fall. D) Technology improvements lead to productivity gainsarrow_forwardWhich of the following does not shift the long-run aggregate supply curve to the right? Group of answer choices A) an increase in the money growth rate. B) an increase in human capital. C) an increase in capital stock. D) improved technology.arrow_forward
- Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers increases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the changearrow_forwarda) Which of the following shifts aggregate demand to the right? Group of answer choices Congress reduces purchases of new weapons systems. The Fed buys bonds in the open market. The price level falls. Net exports fall. b)Aggregate demand shifts left if Group of answer choices government purchases increase and shifts left if stock prices rise. government purchases increase and shifts left if stock prices fall. government purchases decrease and shifts left if stock prices rise. government purchases decrease and shifts left is stock prices fall.arrow_forwardAssume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the changearrow_forward
- (b) Assume that no policy action is taken. a. Show on your graph from part (a) the change in short-run aggregate supply that will return the economy to the natural rate of output. Explain why this happens. b. Label the new equilibrium output and price levels.arrow_forwardThe long-run aggregate supply curve shifts right if immigration from abroad increases. the capital stock increases. technology advances. All of the above are correct.arrow_forward1. As the aggregate demand curve shifts to the right: A) the price level falls and real GDP rises. B) the price level and real GDP both fall. C) the price level and real GDP both rise. D) the price level rises and real GDP falls. 2. The US experienced significant stagflation in the 1970s as a result of: A) a sharp increase in oil prices. B) drastically bad growing weather caused by a drought. C) the expectation that inflation would be high. D) a sharp increase in steel prices. 3. can bring about an inflationary recession. A) Demand-side inflation B) Supply-side inflation C) Neither demand-side inflation nor supply-side inflation D) Both demand-side inflation and supply-side inflation 4. Suppose banks are currently charging a 4.5 percent nominal interest rate on mortgages because they expect inflation to average 3 percent over the life of the loan. If their expectations change so that they instead expect there to be DEFLATION of 2 percent over the life of the loan, can they still…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning