All else equal, a decline in price of inputs across the economy — such as labor — causes 6) A) Rightward shift of aggregate demand [AD] and a higher real GDP [Y] B) Leftward shift of aggregate supply [AS] and a lower Y C) Rightward shift of AS and a higher Y D) Leftward shift of AD and deflatio
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All else equal, a decline in price of inputs across the economy — such as labor — causes 6)
A) Rightward shift of aggregate
B) Leftward shift of
C) Rightward shift of AS and a higher Y
D) Leftward shift of AD and deflation
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Solved in 2 steps
- Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, which of the following explains the adjustment towards long-run equilibrium depicted in Figure B? a. Unemployment (resulting from the short-run equilibrium being below LRAS) causes wages to decline, which increases AS till long-run equilibrium is attained at full employment level of income and a lower price level. b. Government spending is increased, increasing AD to a level sufficient to attain long-run equilibrium at full employment level of income and a higher price level c. In attempting to produce beyond the economy's natural level of GDP, producers bid up wages and prices of other resources, causing the AS to decrease to the point where long-run equilibrium is restored. d. Taxes are increased reducing AD to a level consistent with long-run equilibriumIf membership falls in labor unions and unions become less popular, then: production costs will increase, SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level. production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level. production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level. production costs will fall, there will be a downward movement along SRAS, equilibrium GDP will increase and aggregate price level will fall.Improved methods of inventory control were supposed to reduce fluctuations in inventory stocks. It is clear that these methods have helped reduce the equilibrium inventory/sales ratios in both the manufacturing and trade sectors over the past decade. Yet we find that during the 2001 recession, inventory investment accounted for more than the total decline in real GDP, the first time that had happened since 1949. Explain whether this result is due to a set of odd coincidences, or whether the improved methods of inventory control actually caused bigger fluctuations in inventory investment relative to final sales.
- Question #4. Individual income taxes directly affect personal disposable incomes which in turn affect the domestic demand for goods and services. Production costs depend substantially on oil prices. Market expectations are: (1) income taxes in the U.S. will decline and (2) oil prices will remain relatively unchanged. Using market expectations, what do you expect the U.S. output and prices next year? Assume we are moving from the old equilibrium to a new equilibrium. Please state clearly your assumptions and include a graph to support your answer.Given the following circumstances, indicate whether or not the aggregate supply curve would shift and, if so, which way would it shift: The price of a barrel of oil doubles An advance in alternative energy technology significantly reduces its cost In order to maintain a relatively clean air quality, a carbon emissions tax is levied against firms with a carbon footprint As a result of fracking, the price of natural gas is significantly reduced Advances in technology increase the productivity of the American worker, on average, by 30%Assume an economy operates in the keynisian ( horizontal) ranges of its aggregate supply curve curve. For each of the following changes in condition, state the direction of the effect on : 1. Aggregate demand, 2 aggregate supply 3. Price level and 4. Real gdp A decrease in government expenditure in infrastructure A severe recession occurs in a country, which has been a major importer of the nations exports. The federal government reduces business taxes. The central bank increases the cash interest rate
- In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. The economy of Zarland is operating below the full-employment level of output with a balanced budget. Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply, and aggregate demand, and show each of the following. The country’s current equilibrium output and price level, labeled Y1 and PL1, respectively The full-employment output labeled YfChose one from Multiple choice. 3. Which of the following statements is true if there is an increase in aggregate demand while the economy is in equilibrium on a positively sloping short-run aggregate supply curve? a) Prices rise, national income does not change B) Prices decrease, national income does not change C) Prices go up and national income goes down. D) Prices decrease and national income decreases. E) Prices rise, national income risesAn increase in the price of a barrel of oil will shift the aggregate demand curve to the left and increase the price level/inflation and decrease the level of GDP output True /False
- In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. Assume that a country’s economy is in long-run equilibrium. Using a correctly labeled graph of aggregate demand, short-run aggregate supply, and long-run aggregate supply, show the short-run equilibrium price level, labeled PL1, and output level, labeled Y1. Assume that increased uncertainty has reduced business orders for equipment. What is the impact of the change in business orders on each of the following in the short run? Aggregate demand. Explain. Employment Based on the change in business orders, what will happen to the long-run economic growth rate? Explain. Using a correctly labeled graph of the loanable funds market,…Price Level P₂ P3 0 B C AS₁ AS2 (D AD₂ Q₁ Qf 1 Real Domestic Output AD₁ Refer to the graph. If Qfis potential GDP and wages and prices are flexible, then the long-run aggregate supply curve will beQuestion #4. Individual income taxes directly affect personal disposable incomes which in turn affect the domestic demand for goods and services. Production costs depend substantially on oil prices. Market expectations are: (1) income taxes in the U.S. will INCREASE substantially and (2) oil prices will remain relatively unchanged. Using market expectations, what do you expect the U.S. output and prices in the coming years? Assume we are moving from the old equilibrium to a new equilibrium. Please state clearly your assumptions and include a graph to support your answer.
