2. Suppose that there is a positive aggregate demand shock. Which graph most accurately shows how this would affect the aggregate demand - aggregate supply model? Note that the new curve is shown in gray. a. AS curve shifts right: b. AD curve shifts right: c. AS curve shifts left: d. AD curve shifts left:

2. Suppose that there is a positive aggregate demand shock. Which graph most accurately shows how this would affect the aggregate demand - aggregate supply model? Note that the new curve is shown in gray. a. AS curve shifts right: b. AD curve shifts right: c. AS curve shifts left: d. AD curve shifts left:

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 6QR

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Specific subject - Macroeconomic Analyse the case of a negative supply shock caused by an increase in oil prices and compare with the shock caused by the Covid pandemic. What would be the similarities and differences between the two shocks? What would be the effect of an expansionary economic policy (increase in aggregate demand)? Graph What measures or government intervention would be most appropriate to deal with both types of shocks? Graph Compare the adjustment in both cases with and without government intervention. Graph
Illustrate and interpretthe short-run and longrun effects of temporary and permanentsupply shocks
2. Give an example of a favourable and unfavourable shock to the aggregate supply. Use the model of aggregate demand (AD) and aggregate supply (AS) to explain the effects of such shocks. How do these shocks affect the AD-AS curves?
10. Which of the following are reasons why the short-run Aggregate Supply curve shown in the right-hand diagrams may be vertical? a) The economy at this level of real GDP would be operating beyond the full-employmetn level. b) Inflationary expectations have set-in so, the owners of resources are acting on these inflationary expectations and insisting on higher resource prices in anticipation of future products price inflation. c) Short-run Aggregate Suply in the Classical model is always constant. d) All the above e) Only (a) and (b) are true. f) None of the above.
Using the ASAD graph and starting in long run equilibrium YA = Y* (see the model example in the textbook Figure 13.11) take each of following shocks one by one in separate graphs and decide if the event falls into the real shock (LRAS) category or aggregate demand (AD) shock category. Then graph each. Remember that “shocks” include both good and bad events and the graph should show that in the short run the economy is either that YA < Y* or YA > Y* A fall in the input price of oil A rise in consumer optimism A cut in business taxes if they buy new equipment Foreigners buy fewer US made goods. Consumer Fear New inventions (A) occur at a faster pace than usual A faster money growth rate A permanent cut in income taxes
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How does a credible nominal anchor help improve theeconomic outcomes that result from a positive aggregatedemand shock? How does a credible nominal anchorhelp if a negative aggregate supply shock occurs? Usegraphs of aggregate supply and demand to demonstrate.
3. Did the Covid-19 recession shift the aggregate supply (AS) curve? If so, how?
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3. a) Using AD-AS model, explain how a negative demand shock due to COVID 19 will affect the economy in the short run and long run (Show short run and long run adjustment in a single diagram).
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Please no written by hand solution Consider the following economic situations:C = $4.0 trillionI = $1.5 trillionG = $3.0 trillionT = $3.0 trillionNX = $1.0 trillionF = 0mpc = 0.8d = 0.35x = 0.15r = 1% λ = 0.5A. Calculate an expression for the IS, MP and AD curves ( r= ?, IS Y= ?, AD Y=?)B. Let AS curve be given by the relation: π = 6 + 1.5 (Y - 25.5) (i.e. the price shock is zero). What are the equilibrium values of inflation, output and the real interest rate(π, Y, r)?C. Suppose government purchases are raised from $3.0 trillion to $3.5 trillion. What are new short-run equilibrium inflation values, output and the real interest rate (π, Y, r}?D. Suppose a financial crisis begins, and ƒ increases ƒ = 3. (Assume government purchases are again as in part (a). What are the new short-run equilibrium values of inflation, output, and the interest rate (π, Y, r}?(Please solve all the parts with numerical steps so it could be practiced easily)