To affect the level of potential output, the monetary policy and fiscal policy must Question 1 options: alter short-run aggregate supply. alter short run aggregate demand. affect investment that accelerates capital accumulation. none of the above.
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To affect the level of potential output, the
Question 1 options:
alter short-run
alter short run aggregate demand.
affect investment that accelerates capital accumulation.
none of the above.
Step by step
Solved in 2 steps
- A stimulative monetary or fiscal action should increase aggregate demand. What factors may limit the actual increase in aggregate demand?Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in April 2020. Suppose the government decides to intervene to bring the economy back to the natural level of output by using Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output. PRICE LEVEL 150 130 110 90 70 50 20 22 LRAS 24 26 OUTPUT (Trillions of dollars) AS AD 28 30 AD AS policy. ?The economy of Pakistan has faced both a supply demand shock in the first quarter of 2020. Using the AS/AD model explain how you expect the economy to behave in the short and long run. How does the decision to reduce the policy rate impact the economy. Explain using the ISLM model focusing on impacts on the goods and services market and the financial market.
- In the AD/AS model, what happens if businesses expect higher future profits while inflationary expectations decrease simultaneously? Choose all that apply. Group of answer choices Real GDP decreases. The price level increases. The price level decreases. Real GDP may increase, decrease or remain unchanged. The price level may increase, decrease or remain unchanged. Real GDP increases.An increase in aggregate demand will create a permanent increase in real GDP. True FalsePlease note that this is a multi part quesition; thank you so much for your time and effort it means so much to me! Figure 1: Hayek’s (Classical) AD-AS Model (Image normally goes here) Part 1: Why does Hayek’s aggregate supply curve always lead to an equilibrium level of national output equal to the full-employment level of real GDP? Part2: Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? Part 3: Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?
- If the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then: a) government borrowing is likely to crowd out private investment. b) an inflationary increase in the price level is in real danger. c) the central bank might react with an expansionary monetary policy. d) higher interest rates will crowd out private investment.Match- Identify each item as Expansionary or Contractionary Policy Used to stabilize high price levels and remedy inflation Used during a recession to grow GDP Used to slow down Aggregate Demand or GDP Used during periods of high Unemployment rates : Expansionary Policy : Contractionary PolicyIf an economy is at full employment and Aggregate Demand decreases suddenly, this will cause which of the following? a) an increase in underemployment b) a reduction in tax revenues collected c) a decrease in GDP d) All of the choices is correct e) an increase in unemployment
- Compare and contrast the classical and Keynesian views of aggregate demand and aggregate supply.For each of the following situations, indicate whether the result will be an increase or decrease in aggregate supply or aggregate demand, or have no effect. Increase in the marginal propensity to import Choose... Increase in the capital stock Choose.. increases aggregate supply decreases aggregate supply Increase in exports no effect Increase in the wage rate increases aggregate demand decreases aggregate demand Choose.. Increase in tax rates A new technology is developed, increasing productivity Choose.. Increase in autonomous expenditure Choose.. Increase in the marginal propensity to consume Choose... Increase in the labor supply Choose... Increase in government expenditure Choose...Which of the following does not cause the aggregate demand curve to shift to the right? A) A tightening monetary policy. B) An investment boom C) An expansionary fiscal policy D) An expansionary monetary policy