According to new classical economists, if a decrease in aggregate demand is correctly anticipated, the short-run aggregate supply curve will shiftso that there will be no change in Real GDP.same time the AD curve shiftsO a rightward; rightwardO b. leftward; rightward icleftward; rightwardO d. rightward; leftwarde none of the aboveGHide FeedbackIncorrectat the The economy is in long-run equilibrium when government unexpectedly increases aggregate demand. The expected inflation rate is slow to adjust to the higheractual) inflation rate. If follows that in the short run, according to the Friedman natural rate theory.rises and thefalls.a. the unemployment rate, price levelb. Real GDP rises, unemployment ratec. nominal interest rate, real interest rated. the unemployment rate, Real GDP levele none of the above

According to new classical economists, if a decrease in aggregate demand is correctly anticipated, the short-run aggregate supply curve will shift so that there will be no change in Real GDP. same time the AD curve shifts O a rightward; rightward O b. leftward; rightward cleftward; rightward d. rightward; leftward Onone of the above Hide Feedback O 0 Incorrect at the

According to new classical economists, if a decrease in aggregate demand is correctly anticipated, the short-run aggregate supply curve will shift so that there will be no change in Real GDP. same time the AD curve shifts O a rightward; rightward O b. leftward; rightward cleftward; rightward d. rightward; leftward Onone of the above Hide Feedback O 0 Incorrect at the

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 2CQQ

See similar textbooks

Similar questions

In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
Illustrate each of the following situations with a graphshowing AS and AD curves, and explain what happensto the equilibrium values of the price level and aggregateoutput:a. A decrease in G with the money supply held constant bythe Fedb. A decrease in the price of oil with no change ingovernment spendingc. An increase in Z with no change in governmentspendingd. An increase in the price of oil and a decrease in G
When the economy is experiencing a recession, why would aneoclassical e conomist be unlikely toargue for aggressive policy to stimulate aggregate demandand return the economy to full employment? Explain your answer.
Which of the following shifts aggregate demand to the left? Select one: a. an increase in imports Ob. a decrease in taxes c. None of the other choices are correct O d. a decrease in interest rates O e. an increase in exports
2. The graph below shows the AD-AS model in short-run equilibrium at price level Po and level of real GDP at Yo. Label the following: AD, SRAS, LRAS, Po and Yo. P Y A. Is this SR equilibrium a recessionary gap or an inflationary gap? Why is the undesirable? B. Assume Congress and the President decide to act. How would you suggest they alter each of the following (1,↓↓, or no change)? - Taxes - Transfer Payments -Government Spending C. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. D. As the economy moves from Yo to Yp, what happens to the following (1,↓, or no change)? - Real GDP - the unemployment rate - The price level - the rate of inflation
In the diagram, the economy has Aggregate price level LRAS SRAS, P, Aggregate Demand Yp Y, Real GDP An inflationary gap, so in the long run wages will fall, causing AD curve ti shift to the left. An inflationary gap, so in the long run wages will rise, causing the SRAS curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the AD curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the SRAS curve to shift to the right.
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. a) The Central Bank increases the cash interest rate i need ans of this too.
09. The left-hand Which of the following statements is tru about the diagrams above depicting the macroeconommy in both Keynesian and Classical frameworks and a change from AEo to AE* and ADo to AD*? a) The left-hand diagrams show the effect of an increase in Aggregare Expenditures (and Aggregate Demand), where the short-run Aggregate Supply is horizontal, meaning a constant products price level. b) The right hand diagrams show the effect of an increase in Aggregate Expenditrues (and Aggregate DEmand), where short-run Aggregate Supply is vertical (constant Aggregate Quantity Supplied). c) The left-hand diagrams illustrate the Keynesian range of the shor-run Aggregate Supply curve, where Keynesian expansionary policy does not cause any inflation and thus is very effective. d) The right-hand diagrams illustrate the Classical or Monetarist range of the short-run Aggregate Supply curve, where Keynesian expansionary policy is totally dissipated in…
Explain whether each of the following events shiftsthe short-run aggregate-supply curve, the aggregatedemand curve, both, or neither. For each event thatdoes shift a curve, draw a diagram to illustrate theeffect on the economy.a. Households decide to save a larger share of theirincome.b. Florida orange groves suffer a prolonged period ofbelow-freezing temperatures.c. Increased job opportunities overseas cause manypeople to leave the country.
Suppose the economy is in a long-run equilibrium.a. Draw a diagram to illustrate the state of theeconomy. Be sure to show aggregate demand,short-run aggregate supply, and long-runaggregate supply.b. Now suppose that a stock market crash causesaggregate demand to fall. Use your diagramto show what happens to output and the pricelevel in the short run. What happens to theunemployment rate?c. Use the sticky-wage theory of aggregate supplyto explain what happens to output and the pricelevel in the long run (assuming no change inpolicy). What role does the expected price levelplay in this adjustment? Be sure to illustrate youranalysis in a graph.
Assignment 8 Chapter 12 1. Determine whether the AD or AS curve with shift wwith each scenario below. Each situation is independent of each other. a. A decrease in the personal income tax rate b. An increase in Government Spending c. Decrease in Resource Prices AD or AS AD or AS AD or AS d. Increase in Subsidies for Businesses e. Decrease in Interest Rates AD or AS AD or AS Assignment 9 Chapter 13 1. What is the shape of the Classical Aggregate Supply Curve? 2. What is the difference between an Expansionary (inflationary gap) Gap and Contractionary (Recessionary) Gap? Assignment 10 Chapter 14 1. What are the 3 functions of Money? 2. What are the 2 Money Aggregates and what is included in each one?