(Enter response here.) 6. A number of macroeconomic variables decline during recessions. One of these variables is the GDP. a What other variables, besides real GDP tend to decline during recessions? Given the definition of real GDP and its components, explain the declines in these economic variables which are to be expected. (Enter response here.) b. Empirical studies indicate that the long-run trend in real GDP of the USA has an upward trend. How is this possible given business cycles and macroeconomic fluctuations? What factors explain the upward trend in spite of the cycles?

Q: Which of he following statements accurately explain the scenario illustrated by these diagrams?…

A: A is true as the original demand is ADo and original expenditure is AEo, the inflationary gap is of…

Q: 9. The economy is currently in the long-run macroeconomic equilibrium. a) Using a graph, show the…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Economics 1. Assume a nco-classical aggregate supply model with both long run and short run…

A: Supply and demand are the driving factors underlying the creation, price, and consumption of…

Q: Identify factors that would cause consumption spending to increase. What effect would that have on…

A: Consumer spending is the overall money expended for personal use and pleasure in an economy by…

Q: 6. Which of the following statements regarding aggregate demand are true? Aggregate demand I. is the…

A: The items that are being used for the satisfaction of human needs along with the wants and also help…

Q: 11. Explain why the following statements are false. A.) “The aggregate-demand curve slopes downward…

A: A. The demand in the economy comes from mainly the household sector, the business sector, the…

Q: Which of the following is the technical definition of a recession? A. a fall in GDP for four…

A: Recession is a period when economic activities are falling.

Q: Refer to Figure 9.1. When the price level rises and causes lower consumption expenditures, it is…

A: In an economy aggregate demand curve shows the total output demanded by the households and other…

Q: Assume that the macro-economy is initially in short -run equilibrium.  What happens to the…

A: The short-run macroeconomy equilibrium is determined by the AD-AS model. The intersection of…

Q: 3-Suppose the government creates an order of economists that limits the number of people who can…

A: Note: As per the guidelines we’ll answer the 1st question. Please submit a new question by…

Q: Refer to figure 1. function do you think makes more sense to describe the economy, considering most…

A: The production function determines the output of the firm, produced from using the labour and…

Q: 5) Which of the following is TRUE about the long-run aggregate supply curve? A) It is vertical at…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: 6. What will be the new short-run equilibrium Real GDP in this case? Are we in an inflationary gap…

A: Output gap is the difference between potential output and actual equilibrium output.

Q: Explain why proponents of Keynesian economics believe that it is unlikely for wages and prices to…

A: Keynesians believed in aggregate demand to correct recessionary gap and increase real GDP.

Q: 1. State whether each of the following transactions is a part of aggregate demand in the United…

A: Transaction Included in AD? Where a) David buys a keyboard synthesizer made in the United States.…

Q: 13. Suppose the economy is in a long-run equilibrium. a. Use the AD-AS model to graphically depict…

A: Dear student, you have asked multiple sub-part questions in a single post.In such a case, as per the…

Q: 8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the…

A: Aggregate demand is a sum of consumption spending, investment spending, government social and net…

Q: 8. How does consumer confidence affect the economy according to Keynesian view? a. Aggregate demand…

A: Keynesian view considers consumption spending as an important component of aggregate demand.

Q: (1)The following macroeconomic model describes the economy of CSILAND. Y = C+1+G + NX... .. C = 220…

A: Since you posted a question with multiple sub-parts, we will solve the first three sub-parts for…

Q: 4. Show and explain the Keynesian and classical aggregate supply curves graphically. How does the…

A: Answer: Introduction: Aggregate supply curve: it shows the relationship between the amount of output…

Q: 3. For each question, draw an economy in equilibrium, labeling the initial equilibrium price level…

A: (i) When there is decrease in wealth.   When the wealth decreases, the consumption tends to falls…

Q: 6. Suppose that investment is fixed, as in Chapter 3. The paradox of saving suggests (increase? that…

A: We use the following formulas to get answers: Government deficit = Government expenditure -…

Q: An economy is experiencing a high rate of inflation. The government wants to reduce consumption by…

A: The consumption function, C= C¯+MPC(Y) Since we do not know about autonomous consumption, so the…

Q: 4. Suppose that over a five-year period, nominal GDP increases by 5 percent while real GDP decreases…

A: The nominal GDP simply might rise because of a rise in the price level while the real GDP would rise…

Q: 4. What effect would an increase in aggregate supply have on price levels and GDP?

A: 4. Aggregate supply curve (AS) shows the total amount of good supplied by the producers at different…

Q: 3. True or false? Briefly explain. a) If the economy is in the short-run macro-equilibrium there is…

A: In the long run the economy is at the natural rate of unemployment, which is the rate of frictional…

Q: Write the definition of Macroeconomics with example? 2. Describe the concept of aggregate demand and…

A: Macroeconomics is the study of large population as one. Example, Income of a country, i.e., GDP

Q: 8. In the economy, we found a recessionary gap of 50, relative to potential output of 4,800. Suppose…

A:

Q: 19. Which of the following statements concerning Keynesian analysis are true? Select one: O a.…

A: Keynes analysis started with the recognition that the total quantity demanded of an economy output…

Q: 5. Assume there is a decrease in the demand for goods and services, which leads to a decrease in the…

A: Gross Domestic Product (GDP) refers to the total number of goods and services produced and sold in…

Q: 2. The economy is currently in the long-run macroeconomic equilibrium. a) Using an appropriately…

A: (i) Graph to show the current state of economy is given below:-

Q: 1.Draw Aggregate Demand, Short Run Aggregate Supply, and Long Run Aggregate Supply as if an economy…

A:

Q: How does the aggregate demand curve change if aggregate demand increases in an economy?    a)…

A: The aggregate demand encompases the following:C = ConsumptionI = InvestmentG = Government…

Q: Show and explain by using a graph, what will happen to the price level and real GDP if the quantity…

A: If the quantity of money increases that means the money supply increases in the economy.  As the…

Q: QUESTION 5 a. Suppose that some kind of significant economic event has occurred, and y ou learn that…

A: We are going to analyze the mechanism of AD-AS curves to answer this question.

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.