An inflationary gap occurs when: * a. we need to increase prices b. real output is too low. c. potential output exceeds actual output. d. actual output exceeds potential output.
Q: Stagflation is caused by an increase in cost-push inflation. The increase in costs can be caused by…
A: Given the statement is Stagflation is caused by an increase in cost-push inflation. The increase in…
Q: 1. Classical school of economic thought assumes prices to be flexible because it considers the econ-…
A: Classical school of economic thought believed that the market forces of demand and supply, which is…
Q: Condition 1:National Unemployment Rate Rising,Rate of Inflation Falling. Question1:Given the…
A: Unemployment refers to the situation where an individual belonging to the labor force, capable of…
Q: Which of the following are CORRECT statements regarding inflation and real variables? Select ONLY…
A: The 1st and the 2nd statement in the options given in question are correct answers.
Q: Which of the following statements is correct? a. Inflation and unemployment are negatively…
A: Concepts:Inflation- It is the situation when the power of purchasing of a currency decreases over a…
Q: Determinants of Demand include the following: (a) Changes in supply (b) Prices of goods…
A: Demand refers to the quantity that consumers are willing to buy at specific point of time . Demand…
Q: A significant rise in the price of oil causes: Question 3 options: a) demand-pull inflation…
A: Demand pull Inflation: When the Inflation in the economy is caused because of the excessive…
Q: ppose mortgage rates are increasing from 5% to 9%, and the rate of using prices is expected to rise…
A: The answer is - C. People are less likely to buy houses, because the real cost of financial a house…
Q: All of the following are causes of Great Recession except Group of answer choices Increased…
A: The Great Recession was a period of substantial general deterioration, i.e., a recession,…
Q: An economy is experiencing a high rate of inflation. The government wants to reduce consumption by…
A: MPC is the proportion of the aggregate increase in pay that is spent by the consumer on the…
Q: How can shipping delays and shortages of intermediate goods cause a recession? Why may these…
A: In economics, recession refers to a fall in industrial or trade activity that implies a decline in…
Q: Suppose that a rise in consumer spending causes an expansion. 1. On the following graph, shift a…
A: Expected inflation increases over time in the short run as the curve shifts up from AS1 to AS2 and…
Q: 1A) If “the good" has a price of $1,000, i, = 0.01, & r, expected price of this the good next year…
A: Given: 1A) Price (Pt) =$1000 it=0.01 rt=0.02 To find: the expected price of good next year
Q: One of the following cannot be considered as a factor that affect consumption Select one: a. Price…
A: Consumption function= c+ bY where; c= autonomous consumption b= marginal propensity to consume Y=…
Q: If the marginal propensity to consume is zero, a temporary tax increase leads to a small decrease in…
A: In an economy, if the marginal propensity to consume is zero, it is the situation when an increase…
Q: Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks…
A:
Q: TRUE OR FALSE WITH REASON. 1. In a recessionary gap, the Real GDP that the economy is producing is…
A: In a recessionary gap, the Real GDP that the economy is producing is lesser than Natural Real GDP.…
Q: Comment, on the likely outcome with sufficient arguments? a) Impact on aggregate demand of the…
A: a. Aggregate demand is given by, AD = Consumption + Investment+ Government spending + Net Exports…
Q: This is a symptom of a recession: Real salary increases Promotions occur and bonuses increase O…
A: Recession refers to a period of time when GDP declines for two consecutive quarters.
Q: A rise in aggregate demand (AD) in the short run is most likely to Select one: a. O a. reduce…
A: Y = C + I+ G+ NX Y = Aggregate demand or GDP C= Consumption expenditure I = Investment expenditure…
Q: Price Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that…
A: Answer: If the mortgage rate falls then buying houses will become cheaper. As a result, the demand…
Q: Draw AS/AD curve with the initial curves represented with AS0 and AD0 and the equilibrium with point…
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: onsumer confidence in the economic outlook increases. i) the short run effect on the price level…
A: When the consumer confidence increases, the aggregate demand increases due to enlarged…
Q: There is a persistent fear that there will be a high level of deflation. Many economists warn that…
A: Meaning of Deflation and Inflation: Deflation refers to the downfall in the total spending of the…
Q: Which of the following would NOT be a determinant of demand? A. the price of related goods B.…
A: Option B does not effect demand. Price of inputs affect the Supply of a good, not demand.
Q: When an economy is operating in a positive output gap (Inflationary Gap) which of the following must…
A: An inflationary gap is where potential GDP is less than the actual real GDP in the economy.
Q: In the short run, the decrease in investment spending associated with business pessimism causes the…
A: Disclaimer: Multipart question. Answer to the first three parts provided.
Q: If inflationary expectations are increasing, we would expect that the nominal interest rate would…
A: The Fisher effect states that Real interest rate equals Nominal interest rate minus Expected…
Q: When an economy is operating in a negative output gap (Recessionary Gap) which of the following must…
A: A recessionary gap is where the potential output is higher than the actual output in the conomy.
Q: When disposable income increases, consumption expenditure decreases by the same amount. does not…
A: Disposable income (sometimes known as disposable personal income) is the amount of money available…
Q: Demand-pull inflationary pressure increases as the economy approaches full employment. Group of…
A: Demand pull inflation is when aggregate demand shifts to right causing the price level to go up. The…
Q: Suppose potential GDP is $14000. If consumption is $9700, investment is $2500, Government purchases…
A:
Q: If the government increases both taxes and government spending by $25 billion, the price level and…
A: Aggregate demand is composed of consumption spending, investment spending, government purchases and…
Q: The economy starts out at full-employment equilibrium. Some events then occur that generate…
A: Cost push inflation can be defined as inflation which occurs due to rise in input costs like rise in…
Q: Starting from potential output, if consumer confidence decreases and consumers decide to spend less,…
A: A decrease in consumer confidence shifts the aggregate demand to the left which decreases actual GDP…
Q: What does the LRAS (Long Run Aggregate Supply) represent? Potential output Full employment output…
A: Over the long term, the result an economy can create relies just upon the assets and innovation that…
Q: ive an example of a concept you think may be associated with weak macroeconomic performance.…
A: Economic problems are the ones that demotivate the economy from growing and prospering.
Q: Price level (GDP priceindex) Real GDP demanded Real GDP supplied (trillions of 2005 yen) 75 600…
A: Economics has two branches- microeconomics and macroeconomics. Microeconomics studies the behavior…
Q: Unemployment would decrease and prices would increase if a. aggregate supply shifted left.…
A: Unemployment: Joblessness is a term alluding to employable people and looking for work yet can't get…
Q: Determine whether the government SHOULD APPLY an expansionary or a contractionary policy. There is a…
A: Government undertakes fiscal policy. Expansionary fiscal policy refers to increase in government…
Q: Comment, on the likely outcome with sufficient arguments? a) Impact on GDP when, Interest rates…
A: a)When the rate of interest within an economy is reduced, more people will be willing to borrow…
Q: 1) Explain the concept of Classical unemployment using a diagram. ¸ 2) Explain the concept of…
A: Classical unemployment Here the firms are the receiver of labour so here they demand for the labour…
Q: Explain the effects of propensities, expectations and multipliers in causing a recession.
A: A recession is a situation when an economy is experiencing a downturn in economic activities and…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- 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.I just need assitance and a better understanding of 3 and mostly 4 1. Another economy has the production Y = A * K^0.5 * L^0.5, the marginal product MPL = 0.5 * A * K^0.5 / L^0.5, in which K = 144 and the supply of labor w = 5 * EP/P *L^0.5 Productivity is A=50. In absence of shocks and policies, EP/P=1, the number of jobs is L = 60, and wage is w = 38.73. But now inflation is slower than expected, with EP/P=1.2. Find the new equilibrium number of workers. 2. Find the new equilibrium wage at EP/P=1.2 3. Graph the change in the labor market equilibrium. Mark the before and after equilibria with E0 and E1. Label axes and curves, map relevant values onto axes. 4. Now let's consider this same scenario in terms of the accelerationist Phillips curve. The labor force is N=64. Find the rates of unemployment before and after as (N-L)/N and map them into our surprise inflation indexes, EP/P. Label the natural rate of unemployment, show the cyclical rate of unemployment. Step 1:…in a standard AD/AS SRAS curve is steep A permanent investment increase, that increases output potential, lead to large short term inflation incrreases but none long term Is the true or false
- 1. Use the AD-AS model attached to explain and illustrate the difference between demand side measures and supply side measures and give an example of each. Also mention which markets are embedded within each curve. 2. Use the AD-AS model to Analyze and illustrate the short run impact of an increase in energy prices on GDP, inflation and employment. Which type of inflation is this?A) Identify - and justify with macroeconomic arguments the long-term adjustments (i.e., the possible displacements of the 3 curves identified on the graph) that can be expected, all things being equal. b) Identify - and justify with macroeconomic arguments what are the implications for: i. the inflation rate, ii. the real growth rate, iii.the unemployment rate, and iv. the output gap (i.e. the difference between realized GDP and full capacity GDP)When an economy is experiencing a recessionary gap, the likely outcome is a) quickly rising output prices. b) an increase in the number of workers receiving employment -insurance benefits. c) the number of employment - insurance recipients being the lowest ever . d) consumers optimistic about the future.
- INFLATION RATE LRAS AD SRAS REAL GOP GROWTH RATE Suppose a change in fiscal policy causes the AD curve to shift from AD₁ to AD2, as shown above. Which response below would most likely cause that shift? A fall in taxes OR a rise in government spending. A rise in taxes OR a rise in government spending. A rise in taxes OR a fall in government spending. A fall in taxes OR a fall in government spending.No written by hand solution An economist needs to predict the real wage rate, employment, output, real interest rate, consumption, investment, and price level. The economy is hit with a shock, which the economist thinks is a temporary adverse supply shock. (a) If you were the economist, what would be your forecasts for each of the variables listed above (rise, fall, and no change) in general equilibrium? (b) What if the shock was due to people's reduced expectations about their future income? Which variables did you forecast correctly, and which did you forecast incorrectly in part (a)?Comment, on the likely outcome with sufficient arguments? a) Impact on GDP when, Interest rates have come down in the countryb) Impact on balance of payment, when there is a huge demand of vaccines produced in India in South Africa.c) Inflation rate in India reaches negative 2% (-2%)d) The aggregate demand falls short of aggregate supply in the economy
- If a Keynesian model shows that aggregate demand for both goods and labor has shifted to the left, while wages are sticky and remain at the same level and prices remain at the same prices, what will be the result in the labor market? a a shortage of labor b depression c coordinated wage reductions d a surplus of laborWhen the economy goes into a recession. real GOP---- and unemployment ___ .a. rises, risesb. rises, fallsc falls. risesd. falls, fallsIf the marginal propensity to consume is zero, a temporary tax increase leads to a small decreasein inflation in the short run but a large decrease in inflation in the long run.Answer True or False. Remember to include your explanation
