. Assume that we are at the natural rate of GDP, meaning we do not have a recession or an expansion, and then the Central Bank raises interest rates, how can this create a recession (A) our business investments will increase and our exports will decrease (B) our business investments will decrease and our exports will increase C) our business investments will decrease and our exports will decrease (D) our business investments will increase and our imports will increase

. Assume that we are at the natural rate of GDP, meaning we do not have a recession or an expansion, and then the Central Bank raises interest rates, how can this create a recession (A) our business investments will increase and our exports will decrease (B) our business investments will decrease and our exports will increase C) our business investments will decrease and our exports will decrease (D) our business investments will increase and our imports will increase

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 42CTQ: On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because...

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On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive than substitute products. Explain why aggregate demand does not increase for the same reason in response to a decrease in the aggregate price level. In other words, what causes total spending to increase if it is not because goods are now cheaper?
Suppose the economy is operating at potential GDP when It experiences an increase in export demand. How might the economy increase production of exports to meet this demand, given that the economy is already at full employment?
5 An economic recession means that _______. a. GDP is critically high b. Employment is increasing c. Output and employment is down d. Output is increasing
22. Which of the following is the technical definition of a recession? A. a fall in GDP for four consecutive quarters B. a rise in unemployment for two consecutive quarters C. a fall in GDP for two consecutive quarters D. a rise in unemployment for four consecutive quarters
#22 If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would a rise, making aggregate demand shift left. b rise, making aggregate demand shift right. c fall, making aggregate demand shift left. d fall, making aggregate demand shift right.
1. Consider an economy at full employment. If consumers and firms become less optimistic about the future economy then a) price levels will rise. b) output will rise. c) unemployment will rise.
54. Consider the long-run theory of investment, saving, and growth. Which of the following statements concerning national saving is true? An increase in the rate of saving will lead to a short-run reduction in national income, but to higher economic growth in the long run. A country's saving rate is unrelated to its growth rate. An increase in the rate of saving will lead to a reduction in consumption and therefore to both a short-run and a long-run decrease in national income. An increase in the rate of saving will cause an immediate increase in national income, but may cause a drop in national income in the long-run. An increase in the rate of saving will always be offset by a reduction in private investment.
1. Suppose the labor market is initially at its equilibrium, i.e., labor supplied equals labor demanded. Explain and show graphically the effects of an increase in the economy’s capital stock. Please draw the full graph and provide a detailed explanation of the effect. Label the axes and explain why either the labor demand curve or the labor supply curve shifts. 2. Suppose the goods market is initially at its equilibrium, i.e., the desired level of national saving equals the desired level of investment. Explain and show graphically how an increase of the effective tax rate on capital goods affects the goods market equilibrium. Please draw the full graph and provide a detailed explanation of the effect. Label the axes and explain why either the saving curve or the investment curve shifts.
a) What generally happens to the major macroeconomic variables such as GDP, unemployment rate, and inflation rate during an economic recession? b) Define economic expansion using the reference terms of actual GDP and potential GDP. c) Explain how investment spending and interest rate related. What is the reason behind such a relationship? d) Find the correlation coefficient between interest rate and Real Investment. Does this (actual) value support the theoretical relationship between the variables? Explain. (e) Explain the importance of investment spending for the economy. Only typed answer
(b) Assume that household income increases as a result of recent economic prosperity in Country X. On your graph in part (a), show the effect of the increase in household income on real output and the price level.
1. An increase in the desire to save leads to a decrease in gross domestic product. True or false 2. An increase in investment leads to an increase in gross domestic product. Equilibrium occurs when the forces of expansion and contraction are in equilibrium, that is, when savings are greater than the desired investment. True or false 3. The term aggregate expenditure indicates how the aggregate quantity of goods and services demanded depends on the average price level. True or false
12.5 The Aggregate Demand Curve 1) The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. A) aggregate demand curve B) savings line C) 45-degree line D) consumption function 2) Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure? A) Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline. B) Price level increases cause firms and consumers to hold more money, which raises the interest rate. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure. C) Price level increases in the United States relative to other countries raise net exports, which lowers aggregate expenditure. D) As the price level rises, government spending falls, which lowers aggregate…