Macroeconomic instability.

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Answer 1

Question

Chapter 39, Problem 1DQ

To determine

Macroeconomic instability.

Expert Solution & Answer

Explanation of Solution

In economics, the mainstream of macroeconomic instability is Keynesian-based and it focuses on aggregate spending and its components. Changes in investment spending are significant and lead to changes in the aggregate supply, occasionally, and adverse supply shocks which change the aggregate demand.

Investment spending refers to wide variation and a ‘multiplier effect’ that expands these changes into greater amount in aggregate demand; these can cause demand pull inflation in the forward direction or a recession. A mainstream view of instability could arise on the supply side; it leads to decreases in a nation’s aggregate supply which may threaten the economy by simultaneous causing cost push inflation or recession.

Economics Concept Introduction

Concept introduction:

Demand pull inflation: Demand pull inflation refers to increasing price due to increasing the aggregate demand.

Cost push inflation: Cost push inflation refers to increasing price due to increasing the cost of production.

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Short Description Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS and AD1 intersect at (280, 85) a. How much does aggregate demand need to change to restore the…

Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 1000 billion dollars with an increment of 50 billion dollars, and the y-axis is scaled from 0 to 180 units with an increment of 10 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (200, 40)Point 2 at (800, 160)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (200, 160)Point 2 at (800, 40)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (350, 170)Point 2 at (900, 60)A vertical Long-run Aggregate Supply, LRAS line with two endpoints:Point 1 at (500, 170)Point 2 at (500, 0)Two Reference Points:Lines AS and AD1 intersect at (600, 120)Lines AS, AD, and LRAS intersect at (500, 100) a. How much does aggregate demand need to change to restore the…

a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.95. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.

Answer 2

Question

Chapter 39, Problem 1DQ

To determine

Macroeconomic instability.

Expert Solution & Answer

Explanation of Solution

In economics, the mainstream of macroeconomic instability is Keynesian-based and it focuses on aggregate spending and its components. Changes in investment spending are significant and lead to changes in the aggregate supply, occasionally, and adverse supply shocks which change the aggregate demand.

Investment spending refers to wide variation and a ‘multiplier effect’ that expands these changes into greater amount in aggregate demand; these can cause demand pull inflation in the forward direction or a recession. A mainstream view of instability could arise on the supply side; it leads to decreases in a nation’s aggregate supply which may threaten the economy by simultaneous causing cost push inflation or recession.

Economics Concept Introduction

Concept introduction:

Demand pull inflation: Demand pull inflation refers to increasing price due to increasing the aggregate demand.

Cost push inflation: Cost push inflation refers to increasing price due to increasing the cost of production.

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

Answer 3

Question

Chapter 39, Problem 1DQ

To determine

Macroeconomic instability.

Expert Solution & Answer

Explanation of Solution

In economics, the mainstream of macroeconomic instability is Keynesian-based and it focuses on aggregate spending and its components. Changes in investment spending are significant and lead to changes in the aggregate supply, occasionally, and adverse supply shocks which change the aggregate demand.

Investment spending refers to wide variation and a ‘multiplier effect’ that expands these changes into greater amount in aggregate demand; these can cause demand pull inflation in the forward direction or a recession. A mainstream view of instability could arise on the supply side; it leads to decreases in a nation’s aggregate supply which may threaten the economy by simultaneous causing cost push inflation or recession.

Economics Concept Introduction

Concept introduction:

Demand pull inflation: Demand pull inflation refers to increasing price due to increasing the aggregate demand.

Cost push inflation: Cost push inflation refers to increasing price due to increasing the cost of production.

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 39, Problem 1DQ

To determine

Macroeconomic instability.

Expert Solution & Answer

Explanation of Solution

In economics, the mainstream of macroeconomic instability is Keynesian-based and it focuses on aggregate spending and its components. Changes in investment spending are significant and lead to changes in the aggregate supply, occasionally, and adverse supply shocks which change the aggregate demand.

Investment spending refers to wide variation and a ‘multiplier effect’ that expands these changes into greater amount in aggregate demand; these can cause demand pull inflation in the forward direction or a recession. A mainstream view of instability could arise on the supply side; it leads to decreases in a nation’s aggregate supply which may threaten the economy by simultaneous causing cost push inflation or recession.

Economics Concept Introduction

Concept introduction:

Demand pull inflation: Demand pull inflation refers to increasing price due to increasing the aggregate demand.

Cost push inflation: Cost push inflation refers to increasing price due to increasing the cost of production.

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 39, Problem 1DQ

To determine

Macroeconomic instability.

Expert Solution & Answer

Explanation of Solution

In economics, the mainstream of macroeconomic instability is Keynesian-based and it focuses on aggregate spending and its components. Changes in investment spending are significant and lead to changes in the aggregate supply, occasionally, and adverse supply shocks which change the aggregate demand.

Investment spending refers to wide variation and a ‘multiplier effect’ that expands these changes into greater amount in aggregate demand; these can cause demand pull inflation in the forward direction or a recession. A mainstream view of instability could arise on the supply side; it leads to decreases in a nation’s aggregate supply which may threaten the economy by simultaneous causing cost push inflation or recession.

Economics Concept Introduction

Concept introduction:

Demand pull inflation: Demand pull inflation refers to increasing price due to increasing the aggregate demand.

Cost push inflation: Cost push inflation refers to increasing price due to increasing the cost of production.

Answer 6

Chapter 39, Problem 1DQ

To determine

Macroeconomic instability.

Expert Solution & Answer

Explanation of Solution

In economics, the mainstream of macroeconomic instability is Keynesian-based and it focuses on aggregate spending and its components. Changes in investment spending are significant and lead to changes in the aggregate supply, occasionally, and adverse supply shocks which change the aggregate demand.

Investment spending refers to wide variation and a ‘multiplier effect’ that expands these changes into greater amount in aggregate demand; these can cause demand pull inflation in the forward direction or a recession. A mainstream view of instability could arise on the supply side; it leads to decreases in a nation’s aggregate supply which may threaten the economy by simultaneous causing cost push inflation or recession.

Economics Concept Introduction

Concept introduction:

Demand pull inflation: Demand pull inflation refers to increasing price due to increasing the aggregate demand.

Cost push inflation: Cost push inflation refers to increasing price due to increasing the cost of production.

Answer 7

Chapter 39, Problem 1DQ

To determine

Macroeconomic instability.

Answer 8

Expert Solution & Answer

Explanation of Solution

In economics, the mainstream of macroeconomic instability is Keynesian-based and it focuses on aggregate spending and its components. Changes in investment spending are significant and lead to changes in the aggregate supply, occasionally, and adverse supply shocks which change the aggregate demand.

Investment spending refers to wide variation and a ‘multiplier effect’ that expands these changes into greater amount in aggregate demand; these can cause demand pull inflation in the forward direction or a recession. A mainstream view of instability could arise on the supply side; it leads to decreases in a nation’s aggregate supply which may threaten the economy by simultaneous causing cost push inflation or recession.