7. If consumers save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run and long run? Answer: 8. The AD-AS model shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 4% per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be? Answer: 9. All commercial banks do not hold 100% of their deposits. Why? Should banks have to hold 100% of their deposits? Why or why not? Answer: 10. Laffer is one of the popular Economist who has pointed out that, in some cases, income tax revenue can go up when tax rates go down. Why might this be the case? Answer: Ps

7. If consumers save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run and long run? Answer: 8. The AD-AS model shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 4% per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be? Answer: 9. All commercial banks do not hold 100% of their deposits. Why? Should banks have to hold 100% of their deposits? Why or why not? Answer: 10. Laffer is one of the popular Economist who has pointed out that, in some cases, income tax revenue can go up when tax rates go down. Why might this be the case? Answer: Ps

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 53CTQ: The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both...

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Similar questions

What is the Keynesian zone of the SRAS curve? How much is the price level likely to change in the Keynesian zone?
The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3 per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.
How is cyclical unemployment illustrated in an AD/AS model?
In the Keynesian framework, which of the following events might cause a recession? Which might cause inflation? Sketch AD/AS diagrams to illustrate your answers. A large Increase In the price of the homes people own. Rapid growth in the economy of a major trading partner. The development of a major new technology offers profitable opportunities for business. The Interest rate rises. The good imported from a major trading partner become much less expensive.
What is the intermediate zone of the SRAS curve? Will a rise in output be accompanied by a rise or a fall in the price level in this zone?
Explain why the short-run aggregate supply curve might be fairly flat in the Keynesian zone of the SRAS curve. How might we tell if we are In the Keynesian zone of the AS?
What are the economic reasons why the AD curve slopes down?
What are some of the ways in which exports and imports can affect the AD/AS model?
Does Says law apply more accurately in the long run or the short run? What about Keynes law?
If new government regulations require firms to use a cleaner technology that is also less efficient than what they previously used, what would the effect be on output, the price level, and employment using the AD/AS diagram?