7) If in Figure 26.3.5 the economy does not return to full-employment equilibrium at point A, what will happen to the position of SAS and what type of inflation will result?
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- Instructions: Enter your answers as whole numbers. A) What are the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output? B)If the price level in this economy is 150, will quantity demanded equal, exceed, or fall short of quantity supplied? By what amount? If the price level is 250, will quantity demanded equal, exceed, or fall short of quantity supplied? By what amount? C) Suppose that buyers desire to purchase $ 200 billion of extra real output at each price level. What are the new equilibrium price level and level of real output?Consider an economy in which the marginal product of labour is given by MPN = A(150 − N), where N is the amount of labor used. The amount of labour supplied is given by 60 + 5(1 − t)w, where w is the real wage and t is the tax rate on labour income. (a) Suppose A = 2 and t = 20%. Calculate the equilibrium levels of real wage and employment. (b) Suppose that the economy experiences an adverse supply shock and A = 1. Everything else remains the same as before. Calculate the equilibrium levels of real wage and employment in this case. (c) Suppose that the government lowers the labour income tax by 50% following the adverse supply shock, i.e., A = 1 and t = 10%. Calculate the equilibrium levels of real wage and employment in this case. (d) Use the labour market diagram to illustrate the adjustments from the original equilibrium in part (a) to the equilibrium in part (b) and then the adjustments from the equilibrium in part (b) to the equilibrium in part (c). Explain the adjustments from…Table 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect prices to be a relatively large or small concern for this economy? Imagine that input prices fall and so AS shifts to the right by 150 units. Identify the new equilibrium. How will the shift in AS affect the original output, price level, and employment?
- Suppose the level of structural unemployment increases. How would you illustrate the increase in structural unemployment in the AD/AS model? Hint: How does structural unemployment affect potential GDP?Assume the following model of the closed economy in the short run, with the price level (P) fixed at 1.0: C=0.5(Y-T) T=1000 I=1500-250r G=1500 Md/p=0.5Y-500r Ms=1000 a) Derive a numerical formula for the IS curve, showing Y as a function of r alone. B)Derive a numerical formula for the LM curve, showing Y as a function of r alone. C) What are the short-run equilibrium values of Y, r, and national saving (S)?d)Assume that G increases by 1,500 (i.e., G = 3; 000). By how much will Y increase in short-run equilibrium? e)You are the chief economic adviser in this hypothetical economy. Do you believe that fiscal policy is more potent than monetary policy? Briefly discuss f)Derive the numerical aggregate demand (AD) curve for this economy, expressing Y as a function of PSuppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown below: Amount of Real GDP Demanded, Billions Price Level (Price Index) Amount of Real GDP Supplied, Billions $100 300 $450 200 250 400 300 200 300 400 150 200 500 100 100 Plot the change in demand curve. 1. There was increase in price level from P200 to P250. 2. There was decrease in price from P200 to P150.
- The graph shows an economy's aggregate supply and potential GDP. On the graph, draw an aggregate demand curve when the economy is at an above full-employment equilibrium. Label it AD . Draw a point at the above full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the gap between actual real GDP and potential GDP. >>> Draw only the objects specified in the question.Suppose the aggregate demand and short-run aggregate supply schedules for an economy whose potential output equals $2,700 are given by the table. Aggregate Quantity of Goods and Services Price Level Demanded Supplied 0.50 $3,500 $1,000 0.75 3,000 2,000 1.00 2,500 2,500 1.25 2,000 2,700 1.50 1,500 2,800 What is the short-run equilibrium level of real GDP"The United Kingdom’s economy is in short-run equilibrium with an output level at less than full employment. Using a correctly labeled aggregate demand and aggregate supply graph, show the following: Full employment output, labeled as Yf Equilibrium real output and price level, labeled as YE and PLE Assume that the UK government decreases domestic military expenditures. On the graph from question 1, show how the decreased military expenditures affect the following in the short run: Aggregate Demand Equilibrium real output and price level, labeled as Y2 and PL2. Is the UK government making a good decision in question 2? Why or why not? Explain using your good economic thinking skills!
- Can someone help me graph the following explaination? Following the wage and price adjustments, the short run AS curve shifts rightward, moving the economy towards a new equilibrium (point C) where output returns to its potential level. The price level at point C will likely be lower than at point A, reflecting the adjustment in wages and prices. Now, let's illustrate the AS-AD diagram for point c, showing the short-run impact of these combined policy actions. The AS-AD diagram illustrates the short-run impact of the combined fiscal policy actions. Initially, the economy is at potential output at point A. The aggregate demand (AD) curve then shifts leftward due to the government spending cut and tax increase, moving the economy to a new short-run equilibrium at point B. This shift represents a decrease in real GDP and a potential change in the price level, indicating a slowdown in economic activity and possibly higher unemployment.Considering the growing potential threat of terrorists’ attacks worldwide, the President of an economyapproved a fiscal spending of $24 billion to upgrade its national defense. a. Starting in a long-run equilibrium, draw a well-labelled AD-SRAS-LRAS diagram for the economy. b. Use the same diagram in part (a) to show the SR effect on the economy’s GDP (Y), the price level, andunemployment when the federal government increases its spending on national defense. c. To stabilize the price level and the economy’s GDP, what kind of monetary policy should the economyadopt? Illustrate your answer in the same diagram in (a).Consider the economy described by the following equations: C = 1,600 + 0.9 (Y – T) I p = 800 G = 1,600 NX = 200 T = 1,600 Y* = 29,000 a. Complete the table shown below to find short-run equilibrium output. Consider possible values for short-run equilibrium output as they are given in the table below.Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. OutputY Planned aggregate expenditure (PAE) Y – PAE Y = PAE? 27,200 (Click to select) Yes No 27,400 (Click to select) No Yes 27,600 (Click to select) No Yes 27,800 (Click to select) No Yes 28,000 (Click to select) No Yes b. Short-run level of equilibrium output: c. What is the output gap for this economy? Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. The actual unemployment rate should…