2.) Using the point drawing tool, identify the new equilibrium point and label it 'B'. Note: Carefully follow the instructions above and only draw the required objects. b. The worldwide glut gets worse, and the result is a falling price level (deflation) in the United States. Figure B on the right shows an economy in an initial short-run equilibrium at point A. 1.) Using the three-point curved line drawing tool, illustrate the impact of the decrease in input prices due to the worldwide glut. Properly label this curve. 2.) Using the point drawing tool, identify the new equilibrium point and label it 'B'. Note: Carefully follow the instructions above and only draw the required objects. Price level, P ASO Yo Aggregate output (income), Y ADO

2.) Using the point drawing tool, identify the new equilibrium point and label it 'B'. Note: Carefully follow the instructions above and only draw the required objects. b. The worldwide glut gets worse, and the result is a falling price level (deflation) in the United States. Figure B on the right shows an economy in an initial short-run equilibrium at point A. 1.) Using the three-point curved line drawing tool, illustrate the impact of the decrease in input prices due to the worldwide glut. Properly label this curve. 2.) Using the point drawing tool, identify the new equilibrium point and label it 'B'. Note: Carefully follow the instructions above and only draw the required objects. Price level, P ASO Yo Aggregate output (income), Y ADO

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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18 - : If aggregate demand increases in an economy while aggregate demand is constant in the short run, which of the following statements is correct for the new equilibrium point?A) price decreases and national income increasesB) price rises national income risesC) price increases and national income does not changeD) price goes up and national income goes downE) price decreases and national income decreases.19 - : In which of the following expressions is the equation of change given correctly?A) MV=VK B) MT=PV C) MV=PT D) MP=VY E) MV=P
27. Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, which of the following explains the adjustment towards long-run equilibrium depicted in Figure C? a) Unemployment (resulting from the short-run equilibrium being below LRAS) causes wages to decline, which increases AS till long-run equilibrium is attained at full employment level of income and a lower price level. b) Government spending is increased, increasing AD to a level sufficient to attain long-run equilibrium at full employment level of income and a higher price level. c) In attempting to produce beyond the economy's natural level of GDP, producers bid up wages and prices of other resources, causing the AS to decrease to the point where long-run equilibrium is restored. d) Taxes are increased reducing AD to a level consistent with long-run equilibrium.
(1) Suppose the economy is in long-run equilibrium. If there is a sharp increase in the expected price level, what do we expect to happen? Select one: (A) In the short run, the SRAS curve will shift left, real GDP and price will fall. (B) In the short run, SRAS will shift right, real GDP will rise and prices will fall. (C) In the short run, AD will shift left, real GDP and prices will fall. (D) In the short run, LRAS and SRAS will shift left, causing real GDP to fall.
1.Draw Aggregate Demand, Short Run Aggregate Supply, and Long Run Aggregate Supply as if an economy is in both short run and long run equilibrium. 2. Suppose the price of oil (an input in the production of many goods) decreases. Show how this will affect the model starting from (1) above. What happens to GDP, The Price Level, and Potential Output? Is the economy in a recessionary gap or an inflationary gap? 3. Suppose that consumers feel confident about their futures. Show how this will affect the model starting from (1) above. What happens to GDP, The Price Level, and Potential Output? Is the economy in a recessionary gap or an inflationary gap? 4. Explain in detail and show graphically how the economy will naturally (No government or central bank intervention) return to long run equilibrium after the event from (3) above (don’t consider the event from part 2; only 1 and 3 are relevant to this question) . (the numbers are the numbers of the question from example in question 3 the 1…
26. Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, which of the following explains the adjustment towards long-run equilibrium depicted in Figure A? a) Unemployment (resulting from the short-run equilibrium being below LRAS) causes wages to decline, which increases AS until long-run equilibrium is attained at full employment level of income and a lower price level. b) Government spending is increased, increasing AD to a level sufficient to attain long-run equilibrium at full employment level of income and a higher price level. c) In attempting to produce beyond the economy's natural level of GDP, producers bid up wages and prices of other resources, causing the AS to decrease to the point where long-run equilibrium is restored. d) Taxes are increased reducing AD to a level consistent with long-run equilibrium.
Please answer question 4 1.Draw Aggregate Demand, Short Run Aggregate Supply, and Long Run Aggregate Supply as if an economy is in both short run and long run equilibrium. 2. Suppose the price of oil (an input in the production of many goods) decreases. Show how this will affect the model starting from (1) above. What happens to GDP, The Price Level, and Potential Output? Is the economy in a recessionary gap or an inflationary gap? 3. Suppose that consumers feel confident about their futures. Show how this will affect the model starting from (1) above. What happens to GDP, The Price Level, and Potential Output? Is the economy in a recessionary gap or an inflationary gap? 4. Explain in detail and show graphically how the economy will naturally (No government or central bank intervention) return to long run equilibrium after the event from (3) above (don’t consider the event from part 2; only 1 and 3 are relevant to this question) . (the numbers are the numbers of the question from…
1. In the diagram for this exercise, use aggregate demand and short-run and long-run aggregate supply curves to show an economy at a short-run equilibrium with a contrac- tionary gap of $0.5 trillion when potential output is $10 trillion.Then illustrate how the gap would close in the long run if the economy is self-correcting. 2. In the diagram, use aggregate demand and short-run and long-run aggregate supply curves to show an economy at a short-run equilibrium with an expansionary gap of $0.5 trillion when potential output is $10 trillion.Then illus- trate how the gap would close in the long run using an activist approach.
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate,” you must show how you arrived at your final answer. Assume that the United States economy is currently in a recession in a short-run equilibrium. e. Now assume instead that the government and the Federal Reserve take no policy action in response to the recession. i. In the long run, will the short-run aggregate supply increase, decrease, or remain unchanged? Explain. ii. In the long run, what will happen to the natural rate of unemployment?
Refer to the following figure 1. For this economy, if the actual price level exceeds theexpected price level, how much output will the economyproduce in the short-run? A)$17 trillionB)$17.2 trillionC)$16.7 trillionD) Both A and C.2. Given the situation in part (a), this economy wouldexperience A) a recessionary gap of $0.3 trillionB) an expansionary gap of $0.2 trillionC) neither a recessionary gap nor an expansionary gap.D) an expansionary gap of $17.2 trillion. 3. Given the situation in part (a), in this economy (circlethe letter representing the right answer below)A) the actual rate of unemployment would be less than thenatural rate of unemployment.B) the actual rate of unemployment would be above the naturalrate of unemployment.C) the actual rate of unemployment would be equal to thenatural rate of unemployment.D)none of the above.4. In this economy, given the situation in part (a), in thelong-run (circle the letter representing the right answerbelow)A) the nominal wage…
Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run?a. An increase in aggregate demand.b. A decrease in aggregate supply, with no change in aggregate demand.c. Equal increases in aggregate demand and aggregate supply.d. A decrease in aggregate demand.e. An increase in aggregate demand that exceeds an increase in aggregate supply.
Suppose that the economy's long-run output level is produces accourding to the following production funciton: Y= AK^1/2L^1/2 (will attach picture of the function) and that A = 5, K = 400 and L = 100 A. What is the economic meaning of the powers of K and L? B. What is the level of output ? produced when the economy in long-run equilibrium. C. Suppose that aggregate demand in the economy is described by the following equation:Y^d = m/kP Where M is the money supply, P is the price level and k = 1/V (velocity of money). Explain carefully where this equation is derived from and its interpretation D. Suppose that M = 2000 and that k = 2. What is the price level P at which the economy is in long-run- equilibrium? Plot such an equilibrium on a diagram with P on the vertical axis and Y on the horizontal axis, by distinguishing between the short-run and the long-run equilibrium. E. Now suppose that starting from the equilibrium of (b) and (c), the Central Bank increases M to 3000. Calculate…
Assume the economy of Chile is in a long-run equilibrium with full employment. In the short run,nominal wages are fixed.1. Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply,and aggregate demand. Show each of the following.a. Equilibrium output, labeled Y1b. Equilibrium price level, labeled PL1 2. Assume that there is an increase in exports from Chile. On your graph in question 1,show the effect of higher exports on the equilibrium in the short run, labeling the newequilibrium output and price level Y2 and PL2, respectively.3. Based on your answer in part (b), what is the impact of higher exports on real wages inthe short run? Explain.4. As a result of the increase in exports, export-oriented industries in Chile increaseexpenditures on new container ships and equipment.a. What component of aggregate demand will change?b. What is the impact on the long-run aggregate supply? Explain.