Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 9, Problem 13QP
To determine
Explain the importance of the real balance, interest rate, and international trade effects.
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Q1: Due to COVID-19 situations, the oil prices fall in the international market. Let’s assume that output starts at its natural level.⦁ What happens to Pakistan’s economy (output and price) in the short run? Explain your answer using AS-AD graphs.
⦁ What happens to Pakistan’s economy (output and price) in the long run? Explain your answers using graphs.
(a) In order to get out of recession, the government chooses to reduce taxes (T) by 250. Find the new equilibrium level of income and interest rates.
(b) If instead (i.e. government taxes are back to the original level of 1000), it chooses to increase the money supply (M) by 250. Find the new equilibrium level of income and interest rates.
Select the change that could result in the shift illustrated in the following graph.
Number of Euros per Dollar
85
*
Quantity of Dollars Traded
Multiple Choice
So
increase in riskiness of foreign investment (relative to U.S. investment)
decrease in American wealth
expected depreciation of the dollar
decrease in real interest rate on foreign bonds (relative to U.S. bonds)
Chapter 9 Solutions
Economics (MindTap Course List)
Ch. 9.1 - Prob. 1STCh. 9.1 - Prob. 2STCh. 9.1 - Prob. 3STCh. 9.2 - Prob. 1STCh. 9.2 - Prob. 2STCh. 9.2 - Prob. 3STCh. 9.3 - Prob. 1STCh. 9.3 - Prob. 2STCh. 9.3 - Prob. 3STCh. 9 - Prob. 1QP
Ch. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 9QPCh. 9 - Prob. 10QPCh. 9 - Prob. 11QPCh. 9 - Prob. 12QPCh. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Prob. 16QPCh. 9 - Prob. 17QPCh. 9 - Prob. 18QPCh. 9 - Prob. 1WNGCh. 9 - Prob. 2WNGCh. 9 - Prob. 3WNGCh. 9 - Prob. 4WNGCh. 9 - Prob. 5WNGCh. 9 - Prob. 6WNGCh. 9 - Prob. 7WNG
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- Consider an oil-exporting economy in its long-run equilibrium. Which of the following explains the ultimate short-run effect of a decrease in international oil price on the GDP of this economy? The GDP will ultimately be at potential output. The GDP will ultimately decrease. The GDP will ultimately increase. The effect on GDP will be ambiguous.arrow_forwardplease give me correct answer and full explanationarrow_forwardWhich of the following is most commonly used to monitor short-run changes in economic activity?A. real GDP.B. interest rates.C. the inflation rate.D. value of the U.S. dollar in the foreign exchange market.arrow_forward
- The graph below is associated with a hypothetical country. Consider a decrease in aggregate demand (AD). Specifically, aggregate demand shifts to the left from AD to AD₂, causing the quantity of output demanded to fall at each price level. For instance, at a price level of 140, output is now $200 billion, where initially it was $300 billion. PRICE LEVEL 170 160 150 140 130 120 110 100 8 90 0 100 AD₁ AD₂ 200 300 400 500 600 OUTPUT (Billions of dollars): 700 800 ?arrow_forwardThe graph below is associated with a hypothetical country. Consider a decrease in aggregate demand (AD). Specifically, aggregate demand shifts to the left from AD₁ to AD2, causing the quantity of output demanded to fall at each price level. For instance, at a price level of 140, output is now $200 billion, where initially it was $300 billion. PRICE LEVEL 170 160 150 140 130 120 110 100 90 0 100 +-+ I I 200 300 400 500 OUTPUT (Billions of dollars) AD1 AD2 600 700 800 ?arrow_forwardFill in the missing values in the table by selecting fhe change in each scenario required to decrease aggregate demand. (Change Required to decrease AD) Interest Rates (Increase/Decrease) Domestic currency value relative to the foreign country (Appreciate/Depreciate) Consumer expectations about future profitability (Improve/Worsen) Government spending (Decrease/Increase)arrow_forward
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