Consider a standard AD-AS model. If the SRAS curve is steep, a temporary tax cut leads to a relatively small increase in inflation and relatively large decrease in unemployment. Answer true, false, or uncertain. Please briefly explain your answer.

Q: Graphically explain recessionary and inflationary gaps using AD and AS curves.

A: The below graph slows the recessionary gap and inflationary gap:

Q: Which of the following is false in the dynamic AS-AD model? An increase in the natural level of…

A: The AD-AS model is a means of explaining how national income is determined and how price levels…

Q: Show and explain the effects of an increase in aggregate demand in the long-run and short-run by…

A: AS/AD model depicts the the total supply and total demand interaction at macro level. Aggregate…

Q: Explain the determinants of the aggregate demand (AD) and describe how the AD curve will shift when…

A: The main four components of aggregate demand are consumption, investment, government spending, and…

Q: Suppose in 2020 the US economy was in a short run equilibrium below full employment, such that GDP…

A: The aggregate demand curve(AD) shows the different combinations of GDP level and price level in the…

Q: Define the three ranges of the aggregate supply curve in the AD/AS framework

A: The aggregate supply curve refers to the total amount of goods and services a producer is willing to…

Q: If an economy suffers from a recession induced by weak aggregate supply, the AD-AS model predicts:…

A: Aggregate demand is the total demand of goods and services in an economy. aggregate supply is the…

Q: Strikes across a wide range of industries in South Africa in the first half of 2020 can be…

A: The aggregate demand is the summation of the demand from all the economic agents such as the…

Q: Explain fully why the AD curve has a negative slope.

A: Demand for a good is defined as the amount of that good that consumers are willing and able to buy…

Q: Q.1.10 Strikes across a wide range of industries in South Africa in the first half of 2020 can be…

A: Aggregate demand (AD) and aggregate supply (AS) models shows the market equilibrium that occurs at…

Q: List any five factors that can shift the aggregate demand (AD) curve to the right.

A: Answer: Aggregate demand: aggregate demand refers to the total demand for domestic goods and…

Q: Draw an AD-SRAS diagram, where the economy is initially at equilibrium and input prices do not move…

A:

Q: JobKeeper was designed to keep people employed and ‘sustain’ the economy through the enforced…

A: The wage subsidy(job keeper policy) is the direct payment to the worker by the government. It…

Q: According to Prof Martin "An increase in government spending drives up or increases the private…

A: Crowding out effect appears when the government adopts the policy of expansionary fiscal policy and…

Q: What is the fundamental source of transition dynamics in our AS/AD frame-work?

A: AS-AD framework is one of the most important topics covered in Macroeconomics. In AS-AD model output…

Q: The standard AD-AS model suggests that frequent unpredictable swings in AD will lead to a business…

A: The aggregate demand (AD) shows the relationship between the total demand (real GDP) and the price…

Q: The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both…

A: The aggregate demand-aggregate supply model is a Keynesian macroeconomic model that graphically…

Q: Q.1.10 Strikes across a wide range of industries in South Africa in the first half of 2020 can be…

A: Aggregate-demand curve for labour is shifted through a change in any variable that affects the…

Q: According to the AD-AS model, which of the following would happen as a result of a negative supply…

A: Supply shock is situation where there is sudden increase or decrease in availability of goods more…

Q: Using the dynamic AD/AS model, explain why Kennedy is concerned about the state of the global…

A: Aggregate demand(AD) is the sum of all the quantity demanded(QD) for goods and services that…

Q: Which of the following is false in the dynamic AS-AD model? An increase in the natural level of…

A: AS-AD model: It refers to a model under which the economy can measure the national income with the…

Q: Refer to the information provided in Figure below to answer the question that follow. AD AD AD?…

A: b. D.

Q: Using graphical illustration of AS-AD framework, show the effects of following events on real output…

A: D) When the government raises taxes by $100 billion: An increase in taxes will reduce the disposable…

Q: Refer to Figure 16-1. Suppose the economy is in short-run equilibrium below potential GDP and no…

A: The gap that depicts when the real actual level of output is less than the potential level of output…

Q: Strikes across a wide range of industries in South Africa in the first half of 2020 can be…

A: Answer: Correct option: (c) Leftward shift of the AS curve. Explanation:  Due to strikes (that maybe…

Q: Explain how unemployment and inflation impact the AD/AS model.

A: The aggregate demand–aggregate supply model is a macroeconomic model that determines the level of…

Q: Derive the AD curve using the IS-LM model.

A: DERIVATION OF AD CURVE FROM IS-LM MODEL:

Q: Consider a standard AD-AS model. An increase in the interest sensitivity of consumption and/or…

A: In an economy, the AD-AS model is used to make an analysis of the market condition, and AD-AS curves…

Q: Q.1.1 An increase in the price of oil is an example of a negative supply shock. Use the AD-AS model…

A: Given: An increase in the price of oil is an example of a negative supply shock.

Q: Using an AS/AD framework to describe the events in the story, there would be a A) leftward shift in…

A: AD curve represents the aggregate demand in the economy and AS curve is a representation of the…

Q: An increase in the price of oil is an example of a negative supply shock. Use the AD-AS model graph…

A: In an economy, when there is an increase in the price of oil, it will lead to increase the cost of…

Q: Using graphical illustration of AS-AD framework, show the effects of following events on real output…

A: In the AS-AD model, equilibrium is at such a price level where the aggregate quantity demanded…

Q: Which of the following is false in the dynamic AS-AD model? An increase in the natural level of…

A: Aggregate demand and aggregate supply refer to the schedule that provides information about the…

Q: How could the static AD-AS model be used to show how the job keeper scheme could of sustain our…

A: The job keeper scheme is to support businesses and not-for-profit organizations significantly…

Q: Derive the AD curve using the IS - LM framework with detailed explanation.

A: Assumptions on which AD curve is drawn: The nominal Money Supply (M) is constant. Only Price level…

Q: Use the AD‐AS model graph to explain how the government can increase economic growth and reduce the…

A: Using the AS-AD model government can increase economic growth by expansionary fiscal policy. In…

Q: If the economy is operating in the Keynesian zone of the SRAS curve and aggregate demand falls,what…

A: Keynes postulated that there is a difference between the short-run and the long-run supply curve of…

Q: In the AD/AS model, why does any given AD shock result in a different price and output effects on…

A: Shock:-  Shock refers to the unexpected change in aggregate demand and short run supply curve.…

Q: In the AD/AS model, if both inflationary expectations and business taxes increase, then the price…

A: When talking about AD-AS model, it is the framework to explain the market goods goods and services…

Q: Strikes across a wide range of industries in South Africa in the first half of 2020  can be…

A: Strike in industries leads to fall in aggregate supply of goods.