Cause for the simultaneous rise in the price and quantity in the economy.

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Answer 1

Question

Chapter 5, Problem 1QE

To determine

Cause for the simultaneous rise in the price and quantity in the economy.

Expert Solution & Answer

Explanation of Solution

The equilibrium price and quantity demanded in the economy are obtained at the intersection of the demand and supply curve in the economy. Thus, any shift in the demand or supply curves or the changes in both causes the equilibrium to change in the economy.

When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.

Economics Concept Introduction

Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.

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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 5, Problem 1QE

To determine

Cause for the simultaneous rise in the price and quantity in the economy.

Expert Solution & Answer

Explanation of Solution

The equilibrium price and quantity demanded in the economy are obtained at the intersection of the demand and supply curve in the economy. Thus, any shift in the demand or supply curves or the changes in both causes the equilibrium to change in the economy.

When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.

Economics Concept Introduction

Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.

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Answer 3

Question

Chapter 5, Problem 1QE

To determine

Cause for the simultaneous rise in the price and quantity in the economy.

Expert Solution & Answer

Explanation of Solution

The equilibrium price and quantity demanded in the economy are obtained at the intersection of the demand and supply curve in the economy. Thus, any shift in the demand or supply curves or the changes in both causes the equilibrium to change in the economy.

When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.

Economics Concept Introduction

Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.

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

Answer 4

Question

Chapter 5, Problem 1QE

To determine

Cause for the simultaneous rise in the price and quantity in the economy.

Expert Solution & Answer

Explanation of Solution

The equilibrium price and quantity demanded in the economy are obtained at the intersection of the demand and supply curve in the economy. Thus, any shift in the demand or supply curves or the changes in both causes the equilibrium to change in the economy.

When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.

Economics Concept Introduction

Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.

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 5, Problem 1QE

To determine

Cause for the simultaneous rise in the price and quantity in the economy.

Expert Solution & Answer

Explanation of Solution

The equilibrium price and quantity demanded in the economy are obtained at the intersection of the demand and supply curve in the economy. Thus, any shift in the demand or supply curves or the changes in both causes the equilibrium to change in the economy.

When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.

Economics Concept Introduction

Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.

Answer 6

Chapter 5, Problem 1QE

To determine

Cause for the simultaneous rise in the price and quantity in the economy.

Expert Solution & Answer

Explanation of Solution

The equilibrium price and quantity demanded in the economy are obtained at the intersection of the demand and supply curve in the economy. Thus, any shift in the demand or supply curves or the changes in both causes the equilibrium to change in the economy.

When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.

Economics Concept Introduction

Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.

Answer 7

Chapter 5, Problem 1QE

To determine

Cause for the simultaneous rise in the price and quantity in the economy.

Answer 8

Expert Solution & Answer

Explanation of Solution

The equilibrium price and quantity demanded in the economy are obtained at the intersection of the demand and supply curve in the economy. Thus, any shift in the demand or supply curves or the changes in both causes the equilibrium to change in the economy.

When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.

Answer 12

Ch. 5.1 - Prob. 1Q Ch. 5.1 - Prob. 2Q Ch. 5.1 - Prob. 3Q Ch. 5.1 - Prob. 4Q Ch. 5.1 - Prob. 5Q Ch. 5.1 - Prob. 6Q Ch. 5.1 - Prob. 7Q Ch. 5.1 - Prob. 8Q Ch. 5.1 - Prob. 9Q Ch. 5.1 - Prob. 10Q

Cause for the simultaneous rise in the price and quantity in the economy.

Cause for the simultaneous rise in the price and quantity in the economy.

Explanation of Solution

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