The figure to the right shows an economy in an initial long-run equilibrium atpoint A.LRAS,a. Using the line drawing tool, show how, if at all, the equilibrium real GDP andthe long-run equilibrium price level are affected bya decrease in the value of thehome currency in terms of the currencies of other nations.Properly label this line.Carefully follow the instructions above, and only draw the required objects.P1AADb. According to your graph, the equilibrium price level rises while theequilibrium real GDPAD,RGDP1Real GDP (S trillions per year)Price Level

Demand refers the total amount of goods and services that are willing and able to buy at the…

Answered: The figure to the right shows an…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section: Chapter Questions

Problem 3TY

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Use the Aggregate Supply and Aggregate Demand Model below to answer thequestions that follow Examine the influence of government expenditure on investment in a nation.Use Jot Inc. Ltd a multinational construction company in which you are theChief Exec of the firm that that is highly diversified and receives funds toconstruct highways and other government-funded projects. Also, explain thefactors that cause the Aggregate Demand curve to be downward sloping leftto right
For each situation below, analyse whether it shifts the aggregate demand (AD) curve, the aggregate-supply (AS) curve, both, or neither. Then, if it does shift a curve, construct the AD-AS diagram to show the effect on the economy in the long-run. a) One extraordinary impact of COVID-19 pandemic to the U.S. economy is a massive increase in saving. U.S. recorded nearly tripled saving over the first two quarters of 2020, from $1.59 trillion annualized in the first quarter to $4.69 trillion in the second, which is by far the biggest increase in modern history. b) The prolonged monsoon rain has caused the production of vegetables in Cameron Highlands fell by about 30%. It has severely impacted a lot of crops, including fruits and flowers. Besides, labor shortages due to the pandemic makes the matters worse.
Using AS and AD curves to illustrate, describe the effectsof the following events on the price level and on equilibriumGDP in the long run assuming that input prices fullyadjust to output prices after some lag:a. An increase occurs in the money supply above potentialGDPb. GDP is above potential GDP, and a decrease in governmentspending and in the money supply occursc. Starting with the economy at potential GDP, a war inthe Middle East pushes up energy prices temporarily.The Fed expands the money supply to accommodate theinflation.
Ma4. Please give only typed answer. show steps Suppose that a permanent change in government spending shift the AD curve to the right by 3. Calculate interest rate, inflation, and output in the new longrun equilibrium.
a. What are the short-run equilibrium real GDP and price level in 2019?b. What is the long-run equilibrium real GDP?c. Is the short-run macroeconomic equilibrium a full-employment equilibrium, belowfull-employment equilibrium, or above full-employment equilibrium?d. In transition to the long run, how would the wages in this economy change?e. Following from d, explain how would the short run supply curve move to its long runposition, as the changes in the nominal wages take effect.f. What will the long run price level be?
Q. 2 The outbreak of COVID-19 has had a significant impact on the economy. Let’s assume a COVID shock that leads to lockdown, and we start from the medium equilibrium output level, Yn. Please explain the impacts of the pandemic and lockdown on the economy using the ASAD framework. a) Show the impacts of the pandemic and lockdown on the economy in the short run by drawing the diagram of AS-AD model
With the help of an IS-LM diagram, explain the effects of an expected future tax increase on current output, the current interest rate, current aggregate spending. (It’s be better to explain with diagram, thank you!)
3) Using IS-LM, AS-AD and labor market curves, explain a recession caused by a decrease in investment spendings. please. full answer
18 - : If aggregate demand increases in an economy while aggregate demand is constant in the short run, which of the following statements is correct for the new equilibrium point?A) price decreases and national income increasesB) price rises national income risesC) price increases and national income does not changeD) price goes up and national income goes downE) price decreases and national income decreases.19 - : In which of the following expressions is the equation of change given correctly?A) MV=VK B) MT=PV C) MV=PT D) MP=VY E) MV=P
Describe reasons why the SRAS and/or LRAS may shift left or shift right. Holding AD constant, how would these actions tend to change the equilibrium price level and real GDP produced? (11.3)
Consider a closed economy, where wages are sticky in the short run. The consumption function isC = c0 + c1(Y − T ), where the marginal propensity to consume c1 is equal to 0.75. Initially the economy is in equilibrium at Y = Y* and P = P e, where P e is the price level that was expected when agents agreed their fixed nominal wage contracts. The short-run aggregate supply curve (SRAS) is horizontal. Suddenly the government increases government spending G by $500. 1. By how much will output Y change (compared to its initial level before the change in G) in the long run, after wage contracts are renegotiated? 2. By how much will consumption C change (compared to its initial level before the change in G) in the long run, after wage contracts are renegotiated? 3. By how much will investment I change (compared to its initial level before the change in G) in the long run, after wage contracts are renegotiated?
According to the IS-LM model what happens in the short-run to rhe interest rate, income consumption and investment uder the following circumstances(Note:this is a closed economy) a. the central bank increases the miney supply. b. the government increases government purchases

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