Below is a graphical model of the AS-AD. In this model the initial level of the economy is at the low output and low inflation. Describe what happens to the economy when the BSPdecides to lower interest rate and most likely this will lead to an increase in money supply thereafter.PriceLevelASP1PAD1ADYY1National income(real GDP)Copyright: www.economicsonline.co.ukAnswer the following guide questions. Based on the graph above..a.What happens to the aggregate demand? Describe your answer.b.What happens to the level of output? Describe your answer.c.What happens to the price level? Describe your answer.d. State your conclusion on the effect of the monetary policy made by the BSP.

Lowering of interest rates by the BSP will induce more money supply in the economy. As money supply…

Answer the following guide questions. Based on the graph above. a.What happens to the aggregate demand? Describe your answer. b.What happens to the level of output? Describe your answer. c.What happens to the price level? Describe your answer. d. State your conclusion on the effect of the monetary policy made by the BSP.

Answer the following guide questions. Based on the graph above. a.What happens to the aggregate demand? Describe your answer. b.What happens to the level of output? Describe your answer. c.What happens to the price level? Describe your answer. d. State your conclusion on the effect of the monetary policy made by the BSP.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 59CTQ: Review the problem in the Work It Out titled Interpreting the AD/AS Model. Like the information...

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Review the problem in the Work It Out titled Interpreting the AD/AS Model. Like the information provided in that feature, Table 24.2 shows information on aggregate supply, aggregate demand, and the price level for the imaginary country of Xurbia. Plot the AD/AS diagram from the data. Identify the equilibrium. Imagine that, as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium. How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?
What impact would a decrease in the size of the labor force have on GDP and the puce level according to the AD/AS model?
Economists expect that as the labor market continues to tighten going into the latter part of 2015 that workers should begin to expect wage increases in 2015 and 2016. Assuming this occurs and it was the only development in the labor market that year, how would this affect the AS curve? What if it was also accompanied by an increase in worker productivity?
What are some of the ways in which exports and imports can affect the AD/AS model?
How is the natural rate of unemployment Illustrated in an AD/AS model?
How is cyclical unemployment illustrated in an AD/AS model?
During spring 2016 the Midwestern United States, which has a large agricultural base, experiences above-average rainfall. Using the AD/AS diagram, what is the effect on output, the price level, and employment?
How is long-term growth illustrated in an AD/AS model?
What is the Keynesian zone of the SRAS curve? How much is the price level likely to change in the Keynesian zone?
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
Many financial analysts and economists eagerly await the press releases for the reports on the home price index and consumer confidence index. What would be the effects of a negative report on both of these? What about a positive report?
The outbreak of COVID-19 adversely attacks most economies. Some economists argue that the impacts on the macroeconomy mainly come from (i) the reduction in consumption and investment appetite, while others believe that the impacts mainly come from (ii) the immediate destruction of the supply-chain and production. Last Year This Year Annualized economic growth rate 4% -6% Unemployment rate 5% 8% Inflation rate 2% 5% Using an AD-AS model, explain whether argument (i) or (ii) above fits better to the case of Country X, and briefly discuss one plausible short-run dilemma facing the central bank of Country X.