AD or AS 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 d. Increase in Subsidies for Businesses e. Decrease in Interest Rates AD or AS AD or AS
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- 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?Explain why the short-run aggregate supply curve might be vertical in the neoclassical zone of the SRAS curve. How might we tell if we are in the neoclassical zone of the AS?In your view, is the economy currently operating in the Keynesian, intermediate or neoclassical portion of the economys aggregate supply curve?
- In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?During the 1930s the U.S. entered the Great Depression. During the Great depression investment fell from a yearly rate of $16.7 billion to $1.7 billion. In 1932, President Hoover increased income taxes. Assume the MPC is .92 A) What effect did the decline in investment have on aggregate demand (AD) ? B) Assume that Hoover increased income taxes by $12 billion. How would Hoover’s tax increase have affected AD.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…
- The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by decreasing government purchases to restore full-employment GDP. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ -160 Numeric ResponseEdit Unavailable. -160 incorrect. billion b. If the MPC is 0.9, how much do government purchases need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.8. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.Suppose the Thai economy is currently in a long-run (and thereby short run) equilibrium. Then, the Bank of Thailand (BOT) suddenly increases the money supply. (a) Describe the initial impact of this event in the AD-AS model by explaining whether and how any curve(s) shifts and to which direction. (b) How do the price level and the real GDP of Thailand change in the short run?Which of the following equations is most likely to represent short-run aggregate supply according to the misperceptions theory? A) Y = 6000 B) Y = 6000 + 50(P - Pe) C) P = 2 D) PY = 12,000 Show Work
- The expiration of the FICA payroll tax cut of January 1, 2013 raised taxes by $110 billion per year. If the marginal propensity to save was 0.20, (a) by how much did consumer spending decrease initially? (b) What was the ultimate decline in aggregate demand?For each of the following scenarios, tell a story and predict theeffects on the equilibrium levels of aggregate output (Y) and theinterest rate (r):a. During 2005, the Federal Reserve was tightening monetarypolicy in an attempt to slow the economy. Congress passed asubstantial cut in the individual income tax at the same time.b. During the summer of 2003, Congress passed and PresidentGeorge W. Bush signed the third tax cut in 3 years. Many ofthe tax cuts took effect in 2005. Assume that the Fed holdsMs fixed.c. In 1993, the government raised taxes. At the same time, theFed was pursuing an expansionary monetary policy.d. In 2005, conditions in Iraq led to a sharp drop in consumerconfidence and a drop in consumption. Assume that the Fedholds the money supply constant.e. The Fed attempts to increase the money supply to stimulatethe economy, but plants are operating at 65 percent of theircapacities and businesses are pessimistic about the future.Assume that an economy is initially operating at the natural rate of output (full employmentoutput). Use the AD-AS model to illustrate graphically the effects on price and output of areduction in government spending. Explain your assumptions with respect to the range ofaggregate supply of your analysis. Note: the previous answer is not quite satisfactory. can you please relate the aggregate supply with the decling of government expenditure. thank you