5) Which of the following is TRUE about the long-run aggregate supply curve?A) It is vertical at the level of potential GDP.B) It shows the relationship between the price level and real GDP when the economy is at full employment.C) It does not shift in response to temporary changes in aggregate demand.D) All of the above are true.6) Suppose the consumption function is given by the equation C= 100 +0.8YD, where YD is disposable income. What isthe marginal propensity to save?A) 0.8C) 100B) 0.2D) 2.07) Which of the following shifts the aggregate demand curve rightward?A) a tax cutB) a decrease in the quantity of money and an increase in interest ratesC) a decrease in government expenditureD) expectations that future incomes will fall

5) Which of the following is TRUE about the long-run aggregate supply curve? A) It is vertical at the level of potential GDP. B) It shows the relationship between the price level and real GDP when the economy is at full employment. C) It does not shift in response to temporary changes in aggregate demand. D) All of the above are true.

5) Which of the following is TRUE about the long-run aggregate supply curve? A) It is vertical at the level of potential GDP. B) It shows the relationship between the price level and real GDP when the economy is at full employment. C) It does not shift in response to temporary changes in aggregate demand. D) All of the above are true.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter20: Aggregate Demand And Supply

Section: Chapter Questions

Problem 8SQP

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Assume the economy of Germany is in a long run equilibrium with full employment. Draw a correctly labeled graph of short run aggregate supply, long run aggregate supply, and aggregate demand. Show each of the following Equilibrium output, labeled Y1. Equilibrium price level, labeled PL1 2. Suppose that there is a significant boom in the German stock market, causing all stocks to increase in value by 15%. On your graph in part A, show the effect this will have on the equilibrium in the short run, labeling the new equilibrium output and price level Y2 and PL2, respectively. 3. Using a correctly labeled graph of the Phillips Curve, show how this change will affect the economy. 4. What two fiscal policy options does the federal government have to fix the market imbalance? Explain how each would affect the economy.
Suppose our economy is in macroeconomic equilibrium (also called "general equilibrium") with an upward-sloping aggregate supply curve and a downward-sloping aggregate demand curve. An increase in aggregate demand will: Question 5 options: a) Increase aggregate supply. b) Decrease the price level. c) Causes the aggregate supply to shift to the right. d) Increase real GDP. e) Reduce the number of discouraged workers in the unemployment rate.
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.
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 B? 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
Q. 4 For each of the following statements , show graphically and explain the expected effets of the equilibrium price and output for aggregate demand and aggregate supply , other things remaining constant . a . An appreciation in currency. b . An increase in price of non - labor inputs. C. A decrease in real wage rates.
According to classical economic theory, which of the following describes the potential long-run self-correction of the economy depicted in the graph above? a. Consumption will come out of its stagnation and shift AD to the right, bringing output back to full employment levels. b. Wage rates will increase, attracting labor back to full employment levels ans increasing output back to its natural rate. c. Long-run aggregate supply will shift left due to decreases in spending and restore long-run equilibrium. d. Nominal wages will decrease as the duration of unemployment extends, eventually shifting short-run aggregate supply to the right, bringing output back to its natural level. e. Economies do not self-correct.
Given the following circumstances, indicate whether or not the aggregate supply curve would shift and, if so, which way would it shift: The price of a barrel of oil doubles An advance in alternative energy technology significantly reduces its cost In order to maintain a relatively clean air quality, a carbon emissions tax is levied against firms with a carbon footprint As a result of fracking, the price of natural gas is significantly reduced Advances in technology increase the productivity of the American worker, on average, by 30%
The graph in Figure I presents the annual GDP growth rate of the United States economy since the first quarter of 2004, while the graphs in Figure II represent three different scenarios of the relationship. between aggregate demand and supply that reflect different situations of economic growth. Answer the following questions in detail. Using the shifts in the aggregate demand curve in each of the three graphs in Figure II, explain the function of aggregate consumption and investment. Explain in detail what is happening in Graph A in Figure II and, after examining the data in the graph in Figure I, identify in what period of time said situation is occurring.