13. Using an AS/AD diagram, illustrate the effects of an aggregate supply shock. What happens in the short run to: Output? Unemployment? Price level?
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- How did the large decrease in aggregate demand during the first and second quarters of 2020 (the Coronavirus demand shock) affect real GDP and the price level? Explain how and why the spread of the Coronavirus made an impact on consumer and business investment spending as well as overall aggregate demand? Be specific.Could you please also sort the following shocks into positive or negative aggregate supply or aggregate demand shocks? Fear New inventions occur at a faster pace A faster money growth rateThe figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model. Suppose that AD and ASp represent the initial aggregate demand and aggregate supply in the economy. Figure 18 Refer to Figure 18. Movement of equilibrium from point D to point B could be initiated by: A) a stock market crash that undermines consumer confidence. B) a tax code changes that negatively affect investor expectations. C) a sharp decrease in government spending. D) a higher net exports because of economic expansion in European countries. E) a technological advancement.
- Assume that the economy is operating at or near its long‐run aggregate Identify one negative consequence that would result from a positive demand shock and two negative consequences that would result from a negative supply shock.(Supply Shocks) Give an example of an adverse supply shock and illustrate graphically. Now do the same for a beneficial supply shock.10-4 Summarize what can shift an economy’s potential output in the long run (Supply Shocks) Give an example of an adverse supply shock and illustrate graphically. Now do the same for a beneficial supply shock.
- 1a. Suppose an economy attains its long-run equilibrium at last year. However, after the start of the new year, it has been experiencing high inflation. One group of economists argues that it is caused by excessive aggregate demand, while another group argues that it is caused by the inadequate aggregate supply. How do you know which group is correct? Can you use the aggregate demand and aggregate supply model to explain how you conclude whether the first group or second group of economists is correct? *Use graphs to show your answer if necessary* b. If the first group of economists is correct, describe how the system will return to equilibrium in the long run. Compare the old and new equilibrium and highlight the differences between them.Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose potential GDP (LRAS) equals to $2,700 are given by the table. 1.According to the macroeconomic perspectives, which zone is the short-run equilibrium falling into? 2.Would you expect unemployment rate of this economy to be relatively high or low, and explain why? What about the price level, a large or small concern, and why? 3. Now suppose aggregate demand increases by $700 at each price level; for example, the new aggregate demanded at a price level of 50 now equals to $4,200. Add a column of the new aggregate demanded at each price level in the above table. Plot a new AD curve (on the same graph you got in a.) and label the new equilibrium on the same graph.https://courses.aplia.com/problemsetassets/macro/Fuller_Katrina/article.html You’ve considered two different economic shocks resulting from Katrina: An aggregate supply shock: Katrina increased energy prices and temporarily reduced U.S. productive capacity. An aggregate demand shock: Government responded to the hurricane with massive expenditures on aid and rebuilding. Use AD-AS diagram to consider what the aggregate supply and aggregate demand model predicts about the combined economic impact of these two shocks. What does the aggregate supply and aggregate demand model predict about the combined impact of these shocks on the U.S. economy? What happens to the price level What happens to output level What happens to the unemployment rate
- 67 please quickly thanks ! Consider an economy initially in a long-run equilibrium. A positive AS shock will _____ the price level and _____ output in the short run. In the long run, the price level will _____ and output _____. a.Increase; increase; return to its initial level; will be restored to potential output. b.Decrease; increase; decrease further; will be restored to potential output. c.Decrease; increase; return to its initial level; will be restored to potential output. d.Decrease; decrease; decrease further; will decrease further. e.Increase; increase; decrease; will be restored to potential output.The table below shows the aggregate supply and aggregate demand schedules for the small economy of Pearl, an island in the South Pacific, measured in billions of 2012 dollars. Price Level Aggregate Supply Aggregate Demand 150 34 16 140 31 19 130 28 22 120 25 25 110 23 28 Suppose there is a negative supply shock that decreases the aggregate supply by $6 billion at each price level.What is the new equilibrium GDP as a result of the supply shock? Question 15Answer a. $22 billion b. $23 billion c. $16 billion d. $19 billion e. $17 billion137.) If residents are myopic, an increase in “worthless” government spending, financed by higher current taxes will cause Lower output and higher prices in the short run A rise in aggregate demand, and thus higher output in the long run A decrease in aggregate demand None of the above