Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 45, Problem 1CYU
a.
To determine
To draw: Labeled graph for aggregated
a.
Expert Solution
Explanation of Solution
Referring to the graph, the equilibrium is attained when aggregated demand and
Economics Concept Introduction
Demand and Supply: Demand refers to the curve that depicts the relationship between the quantity demand at given
b.
To determine
The impact on short-run real
b.
Expert Solution
Explanation of Solution
If government spending is decreased, then price level will be reduced and the aggregate demand curve AD1 will shift towards left i.e. AD2. GDP will shift to y2.
Economics Concept Introduction
Demand and Supply: Demand refers to the curve that depicts the relationship between the quantity demand at given price whereas supply refers to the curve that depicts the relationship between the quantity that supplier is ready to sell at given price.
c.
To determine
The impact on GDP and price level in long-run.
c.
Expert Solution
Explanation of Solution
There will be increase in real GDP if government spending decreases and prices will be reduced.
Economics Concept Introduction
Demand and Supply: Demand refers to the curve that depicts the relationship between the quantity demand at given price whereas supply refers to the curve that depicts the relationship between the quantity that supplier is ready to sell at given price.
d.
To determine
The impact on interest rates on decrease in government spending if deficit is present.
d.
Expert Solution
Explanation of Solution
The government spending will effect in interest rate which will lower it. This will effect in increasing GDP and higher savings. The demand curve will shift towards AD1.
Economics Concept Introduction
Demand and Supply: Demand refers to the curve that depicts the relationship between the quantity demand at given price whereas supply refers to the curve that depicts the relationship between the quantity that supplier is ready to sell at given price.
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Chapter 45 Solutions
Krugman's Economics For The Ap® Course
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