Exhibit 16.7 Price level 26 22 16 10 6 Potential Output a ▬▬ OL AD bike 2 SRAS Real GDP 0 80 Y* 200 140 Refer to Exhibit 16.7, which reflects the relationship between the inflation rate and the unemployment rate. If the economy is initially at point c and aggregate demand increases, in the long run, the economy will. a. stay at point c. O b. move toward point a. O c. move toward point b. O d. move toward point d. O e. move toward point f. ^ bike jpg.jpg bike 2.jpg ENG AD" AD* hp >

Exhibit 16.7 Price level 26 22 16 10 6 Potential Output a ▬▬ OL AD bike 2 SRAS Real GDP 0 80 Y* 200 140 Refer to Exhibit 16.7, which reflects the relationship between the inflation rate and the unemployment rate. If the economy is initially at point c and aggregate demand increases, in the long run, the economy will. a. stay at point c. O b. move toward point a. O c. move toward point b. O d. move toward point d. O e. move toward point f. ^ bike jpg.jpg bike 2.jpg ENG AD" AD* hp >

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 3SCQ: The short run aggregate supply curve was constructed assuming that as the price of outputs...

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Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
What impact would a decrease in the size of the labor force have on GDP and the puce level according to the AD/AS model?
Many financial analysts and economists eagerly await the press releases for the reports on the home price index and consumer confidence index. What would be the effects of a negative report on both of these? What about a positive report?
Suppose the U.S. Congress passes significant immigration reform that makes it more difficult for foreigners to come to the United States to work. Use the AD/AS model to explain how this would affect the equilibrium level of GDP and the puce level.
onvince his colleague Bilal that the 24. Firas a university student, trying to Maximum capacity output Net exports O Full employment range of output the five regions of the aggregate Unemployment supply curve diagram? O he ed hifts o ore spending. 23. Which of the following is not one of
Illustrate and interpretthe short-run andlong-run aggregatesupply curves
In the diagram, the economy has Aggregate price level LRAS SRAS, P, Aggregate Demand Yp Y, Real GDP An inflationary gap, so in the long run wages will fall, causing AD curve ti shift to the left. An inflationary gap, so in the long run wages will rise, causing the SRAS curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the AD curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the SRAS curve to shift to the right.
Explain whether each of the following events shiftsthe short-run aggregate-supply curve, the aggregatedemand curve, both, or neither. For each event thatdoes shift a curve, draw a diagram to illustrate theeffect on the economy.a. Households decide to save a larger share of theirincome.b. Florida orange groves suffer a prolonged period ofbelow-freezing temperatures.c. Increased job opportunities overseas cause manypeople to leave the country.
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. (a) An increase in government expenditure in infrastructureClick or tap here to enter text.(b) A severe recession occurs in a country, which has been a major importer of thenation’s exports.Click or tap here to enter text.(c) The federal government increases business taxesClick or tap here to enter text.(d) The Central Bank increases the cash interest rate
I is economy IS In a recessIonary yap wrieı ure aciuai GUP IS Delow pouu DIIIIUI. b. Explain why wages rise when output is greater than potential but fall when output is less than potential. When there is a recessionary gap, if there is no intervention in the economy the level of actual unemployment will rise above the natural level of unemployment in the economy. Thus, there will be more competition among workers to find a job, which will put downward pressure on the level of wages. 1- c. For each situation, fill in the table by identifying whether the AS curve shifts up, down, or is stationary. Real GDP Rate of Shift of 760 770 780 7E0o a10 s20 B30o 840 B50 Situation (billions Wage of dollars) Change AS Curve A 760 3.0 % shifts down B 780 1.5 % shifts down 800 0.0 % is stationary D 820 1.0 % shifts up 845 2.0 % shifts up Level of GDP d. Use the multipoint drawing tool to plot and label the Phillips curve on a scale diagram for this economy. Use all and only the points provided in the…
The following graph shows aggregate demand and short-run aggregate supply. 1.) Use the line drawing tool to show the effect of expectations of an increase in the future price level Properly label this line. 2.) Use the point drawing tool to show the new equilibrium price level and real GDP Label this point 'B' Carefully follow the instructions above, and only draw the required objects. Price level Po A Real GDP (Y) SRAS ADO
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.