a) Find the short-run equilibrium (i.e. the real output and the price level thereof) of this economy. b) If the natural level of output is 3500, which one will be higher, the unemployment rate at point A, or the natural unemployment rate? Explain. c) Give two reasons as to why the short-run aggregate supply is upward sloping.
Q: Lets try an example Given the following Equations Market Demand: P = 200- Q Marginal Cost (Supply)…
A: Negative Externality: When a private action has a negative impact on bystanders and is not…
Q: Question 7 The production function is f(x,x)=x¹2x¹2₂. a. In the short run the amount of factor 2…
A: Since you have posted a question with multiple sub-parts, we will solve the subparts asked by you.…
Q: 6. Let (inverse) demand be Pb = 99 - 1 Qb and (inverse) supply be Pv = 28 + 3 Qv. Consider the shift…
A: Equilibrium is where the demand curve intersects the supply curve. Demand curve is downward sloping…
Q: Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation…
A: Nominal Interest rate = 9% Expected Inflation = 5% Actual inflation = 3%
Q: Question 14 Scenario B: The demand for Cleveland Music Night pass (Q) is given as follows:…
A: The firm maximizes its profit when the marginal revenue is equal to the marginal cost (MR=MC).…
Q: 5. Let (inverse) demand be Pb = 91 - 3 Qb and (inverse) supply be Pv = 15 + 2 Qv. Consider the shift…
A: The equilibrium is established where the demand and supply forces are equal. The change in the…
Q: 4. Maximize utility U = xy subject to 4x+3y=60, where x and y are the two consumption goods, 4 is…
A: The point by first order conditions maximize utility if the determinant of border Hessian matrix is…
Q: A multiple regression analysis produced the following output from Minitab. Regression Analysis: Y…
A: P-value approach of hypothesis testing: The p-value is calculated using the test statistic (t-test…
Q: The von-Neumann Morgenstern utility function is of the form u(e) - In(e). There is a lottery over…
A: A utility function is a mathematical representation of the utility that a person may derive by…
Q: Consider two goods, X and Y. If the price of Y increases and, as a consequence, the demand curve for…
A: Substitute goods: If two goods are used for the same purpose by the consumers. Complementary goods:…
Q: Suppose that the nominal interest rate is 12%, the inflation rate is 5%, and the investor's tax rate…
A: In any economy, the real interest rate is the gap between the nominal interest rate that exists in…
Q: A firm will earn economic profits whenever Question 29 options: A) average revenue exceeds…
A: Profit is the difference between total revenue and total cost. Total revenue is the product of…
Q: Suppose that in response to huge job losses in the U.S. textile industry, Congress imposes a 100…
A: Due to huge job losses in the U.S. textile industry, congress imposes a 100 percent tariff on…
Q: Use the relationship between the marginal cost curve and the average total cost curve to explain why…
A: Marginal cost is the cost of producing an additional unit of quantity. Average total cost is the…
Q: 27) During the 2008 recession, the Federal funds "Discount" rate was set by the Fed at a record low…
A: The real interest rate can be calculated using Fisher's equation by deducting the nominal interest…
Q: Why the government needs to intervene in the markets?
A: The classical economy argues that economy is self sufficient and the forces of demand and supply…
Q: Question 31 Which of the following statements about oligopoly is not correct? OA. there is no single…
A: In case of Oligopoly market structure there are few firm that control the entire market. The firms…
Q: Which of the following is a microeconomics question? O Should the government use fiscal policy to…
A: Microeconomics examines specific economic entities. Macroeconomics is a subfield of economics that…
Q: Which of the following are included in economist Robert Mundell's requirements for an optimal…
A: Robert mundell proposed theoretical grounds to merge or share a single currency across difference…
Q: Panama uses the USD as their official currency since 1903 because their own peso was highly…
A: Controlling an inflation is necessary for any country .Inflation is considered bad because it…
Q: Question 17 According to Classical Economics, the macro economy O faces recession when Aggregate…
A: Classical economists believe that the economy always operates at a full employment level. It does…
Q: Which of the following is true if good x is an externality exhibiting good.
A: Good x is an externality exhibiting good and hence the externality can be either positive or…
Q: True or False? Okun’s Law relates cyclical unemployment to short-run output. True False
A: In economics, cyclical unemployment refers to the situation when there is a change in unemployment…
Q: Instacart offers consumers a convenient form of home delivery service for groceries. Units of output…
A: The isoquant curve depicts the combinations of capital and labor required to produce a given level…
Q: sustainable development 8
A: Maintaining the ability of usual natural systems to continue delivering the natural resources and…
Q: What do experts consider the key to securing a long-term business loan?
A: A long-term business loan is kind credit facility that a business can avail in the long term. It can…
Q: Which of the following is a component of the structure of the short-run model? MP curve IS curve…
A: The IS Curve shows potential interest and income ratios along which the market for products is in…
Q: 0 a S=MC D 0 gh (B) MC MR Q₂ (A) Refer to the above diagrams. In diagram (B) the profit-maximizing…
A: In a monopoly , There exists a single seller. There are high barriers to entry and exit. The…
Q: In Winnipeg the vacancy rate (the percent of apartments that are available to rent) is very low,…
A: In a competitive market, equilibrium is attained at a point where the quantity demanded and quantity…
Q: 9. Let (inverse) demand be Pb = 84 - 1 Qb and (inverse) supply be Pv = 20 + 2 Qv. What quantity will…
A: Market equilibrium: At the market equilibrium we have demand equals to supply. Or at market…
Q: It can be argued that banks are a very useful part of creating economic activity. It can also be…
A: Banks are financial institutions that accept money from the public known as deposits and provide…
Q: 10 An electric utility is removing a cracked heat exchanger The PUC is allowing full recovery for…
A: Annual economic worth is the difference bet all the benefits and costs incurred in a one-year…
Q: Q₁0 Q₂ 120 MNB1 A PV[MNB2] B C 70 50 D E $ 100 120 20 0 The graph above shows the potential ways to…
A: A consumer will only spend up to a certain amount on a supplemental commodity or service, known as…
Q: If the supply of land is perfectly inelastic, then an increase in the demand for land ca by…
A: Demand can be classified as elastic, inelastic or unitary. An elastic demand is one in which the…
Q: Only typed answer A monopoly has an inverse demand function given by p = 480 – 4Q and a constant…
A: Given that, A monopoly has an inverse demand function given by p = 480 – 4Q A constant marginal…
Q: The cost function for a firm is given by TC-4,000+ 0.1Q+0.0102. Marginal costs are given by MC -0.1…
A: Total cost is the cost of producing all the quantities. Marginal cost is the cost of producing an…
Q: Explain what the Coase Theorem is.
A: Coase theorem was developed by the economist Ronald Coase as a legal and economic theory. It…
Q: Quantity 1 2 3 4 5 Price $20 $19 $18 $17 $16 Total Revenue $20 $38 $54 $68 $80 Marginal Revenue…
A: Marginal revenue measures the change in total revenue due to a change in quantity. i.e., Marginal…
Q: The IS-LM model suggests that savings reduces output in the economy. We can show this by noting that…
A: The IS-LM model or rather the Keynesian cross from which the IS curve originates states that because…
Q: The cross price elasticity of demand for complements is: 1) negative. 2) positive. 3) equal to 1. 4)…
A: Cross price elasticity of demand states the ratio of percentage change in quantity demanded of one…
Q: Exhibit 12-2 Unemployment categories # of Individuals Category Frictional unemployment Structural…
A: Here, the given table shows different categories of unemployment, discouraged workers, fully…
Q: V2. If your nominal wage rises from $10 to $10.50 per hour and the CPI is 5%, what happens to your…
A:
Q: Consider a shock to the economy which temporarily increases unemployment. Which of the following is…
A: The percentage of additional labor hired during a particular period of time is known as accession…
Q: Compute the benefit ratio of the following project: = P134,000.00 Project Cost Gross Income =…
A: B-C ratio is the benefit to cost ratio. It is calculated by the following formula :- B-C ratio =…
Q: Vlad loves vases with orchids. More precisely, he loves vases with three orchids in each. When his…
A:
Q: Instacart offers consumers a convenient form of home delivery service for groceries. Units of output…
A: Isocost curve shows the same cost at each point on the curve. Isoquant curve shows the same amount…
Q: Why does the IS curve slope downward? Because inflation can wreak havoc on short-run output Because…
A: IS curve shows negative relationship between interest rate and output or income. The points on IS…
Q: O O Use the following information for the next four (4) questions. Ally Gator. Inc is the sole…
A: In monopoly market, the producer tries to produces at the level where marginal revenue equals to…
Step by step
Solved in 4 steps
- How is cyclical unemployment illustrated in an AD/AS model?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?Consider the AS-AD and three-equations models of a closed economy. Write down the expressions for the AS and AD curves and interpret the expressions: what is the intuition behind the two curves? What must be true of the model parameters and variables in the long-run equilibrium, i.e. in the steady state? Analyse the effects of an oil supply shock that causes a temporary increase in inflation, using the three-equation model. Assume that the shock lasts for one-period and then assumes the value 2%. Describe the mechanisms that bring the economy back to long-run equilibrium. What happens to aggregate demand? Consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. Analyse the effects of a decrease in the inflation target from ? to . Explain the mechanisms behind the adjustment to the new steady state.
- Suppose Chino is a closed economy. A large portion of the work force has joint astrong labor union. As such, the nominal wages of most workers are downwardrigid.Suppose most households lose their wealth in a recent clash of the stock market.How would the price and output level of Chino be affected in the short run?Explain by using the AD-AS model. Particularly, use the sticky-wage model ofaggregate supply to explain the magnitude of the effects on price and output.In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor demand curve? How about an increase in taxes?JobKeeper was designed to keep people employed and ‘sustain’ the economy through the enforced lockdown. Using the static AD/AS model explain. Use the static AD-AS model to explain how the JobKeeper policy worked to sustain the economy (even though unemployment increased).
- In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor demand curve? How about an increase in the money supply?n the AD-AS model, assume that an economy’s aggregate demand, denoted by QD=400−P, and SR aggregate supply, denoted by QS=P, currently intersect at price level = $200 and the full employment output level = 200. What curve would have shifted if a new short-run equilibrium were to occur at an output level of 300 and a price level of $300? Group of answer choices SRAS shifts leftward. AD shifts leftward. SRAS shifts rightward. AD shifts rightward.Describe the full employment macroeconomic equilibrium in the As-AD model. what would happen on the AS-AD model of the government put forward and pass 2 trillion dollarinfrastructure plan?what has happened to the equilibrium output and price level ?what gap would be created ?how does the economy respond to this gap? what has happened to the equilibrium output and price level due to part five?
- Using a separate set of AS-AD diagrams for each of the following scenarios, explain what is likely to happen to the output (Y), unemployment, price level, and inflation in the short run, making sure to explain the shifts in any curve: a. U.S. households decide to save more and more than doubles the total savings per year. b. With the news of rapid vaccinations, the consumer and business confidence surges. c. Natural gas is now the most important source of power in the U.S. And, since the advent of fracking, it is also the cheapest. New administration imposes a ban on fracking which increases the prices of not only natural gas, but all carbon fuels. d. The U.S. is currently described as mostly recovered from the pandemic induced recession. Congress and the White House enacts a $2 Trillion “infrastructure” spending.What is the fundamental source of transition dynamics in our AS/AD frame-work?Explain how unemployment and inflation impact the AD/AS model.