In a classical AD-AS macro equilibrium: Answers: A. Aggregate quantity demanded equals SR and LR aggregate quantity supplied. B. The equilibrium price level and rate of output are both stable. C. Buyers' and sellers' intentions are compatible. D. All of the above.

In a classical AD-AS macro equilibrium: Answers: A. Aggregate quantity demanded equals SR and LR aggregate quantity supplied. B. The equilibrium price level and rate of output are both stable. C. Buyers' and sellers' intentions are compatible. D. All of the above.

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 4SCQ: In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?

See similar textbooks

Related questions

Q: Suppose the economy is initially in a long-run equilibrium. Using the AD-AS framework, show…

A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…

Q: AD; SRAS; LRAS; Short-run equilibrium; Long-run equilibrium; Recessionary gap and Inflationary gap.…

A: Inflationary gap occurs when the current output(GDP) in a nation is in excess of the…

Q: All else equal, a decline in price of inputs across the economy — such as labor — causes 6) A)…

A: There are various determinants that affect the aggregate demand and aggregate supply.

Q: The diagram above shows the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run…

A: An increase in income tax rates will reduce the disposable income, therefore, the aggregate demand…

Q: Assume that output began at its natural level. By using AD-AS (Upward sloping) and Philips curves,…

A: Macroeconomics is a sub-part of economics that is used to understand, the policies and fiscal…

Q: Macroeconomics question: In an economy, the government wants to increase aggregate demand by $50…

Q: Which of the following would be most likely to produce a rightward shift in the short run aggregate…

A: Meaning of Aggregate Supply: The term aggregate supply refers to the situation under which the…

Q: E D Aggregate output Refer to Figure Which of the following causes the economy to move from Point A…

A: (D)

Q: Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that…

A: Long run refers to a period of time where all cost and factors of production become variable.All…

Q: Given the event below, describe the effect on the aggregate demand curve (AD). A.No effect…

A: Aggregate demand is the sum of consumption spending, investment spending, government spending, and…

Q: Use an aggregate demand (AD) and aggregate supply (AS) model to respond to the following questions.…

A: please find the answer below.

Q: In the Aggregate Demand and Aggregate Supply model, an increase in consumer confidence will: O…

A: Aggregate demand curve slopes downward, it shows an inverse relationship between price level and…

Q: The aggregate demand and aggregate supply model is a useful simplification of the macroeconomy used…

A: [a] In a 2-D graph, x-axis or the horizontal one explains the dependent variable whereas y-axis or…

Q: b. Initially ADo and ASo are the relevant schedules. The equilibrium price level is and equilibrium…

A: Please find the answer below.

Q: Assume the supply of loans decreases by 25%, even though the economy is initially in both short-run…

A: a) Aggregate output Answer: In the short run, a reduction in the supply of loans would also reduce…

Q: Examine the influence of government expenditure on investment in a nation. Use Jot Inc. Ltd a…

A: Aggregate demand (AD) is defined as the total amount of commodities and services that is bought by…

Q: 1. Consider the following classical macroeconomic model. Y - C(Y –T') + I(r -x)+G 0 0,1 0 (4) N = Nº…

A: Equation 1 is of GDP: Where C(Y-T) is consumption function. Households, corporations, and the…

Q: If the economy goes into a recessionary gap, a.) How will the change in wages affect short run AS…

A: A Recessionary Gap is defined as a gap which occurs when the real GDP of an economy is lower than…

Q: Investment Demand $75 150 225 Investment ($) $50 100 150 Investment (5) AS AD, ($150) AD, ($100) AD,…

A: At the junction of the AS and the AD3, the economy is in a state of balance. The AD3 is equal to a…

Q: v the AD, SAS, and LAS curves, show the equilibrium level of real GDP and price level. is the value…

Q: Suppose the economy experiences a "supply shock" due to a fall in oil prices. As a result, the…

A: Gross Domestic Product (GDP) refers to the total or final value of all the goods and services that…

Q: Use an aggregate demand and supply diagram to illustrate and explain how each of the following will…

A: Note: As per the guidelines we will answer only three subparts. Please resubmit the question again…

Q: The economy starts out on the curves AD, and SAS, Suppose that people expect deflation (a falling…

A: Aggregate demand: It is the sum total of the final value of all the goods and services that have…

Q: s no change in aggregate supply and no change in government policy, an increase in consumer…

A: Aggregate demand = Personal consumption + Government spending + Gross investment + Net exports When…

Q: For each situation below, analyse whether it shifts the aggregate demand (AD) curve, the…

A: AD-AS model: It refers to the model under which the change in the price level and change in national…

Q: 1. a) Construct the AD-AS model showing AD, short run AS and long run AS intersecting at the…

Q: the economy is self-regulating and in a recessionary gap, what happens? a. Wages rise, the SRAS…

A: Recessionary gap is a monetary term that alludes to a circumstance where the real GDP is not as much…

Q: Suppose that government reduces business regulations. Which of these occurs in the AD&AS Model? O…

A: Aggregate demand is the total expenditure incurred by all the sectors of the economy during a given…

Q: 80 1600 400 800 90 1400 600 800 100 1200 800 800 110 1000 1000 800 120 800 1200 800 130 600 1400 800…

A: *Answer:

Q: Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that…

A: AD : Y = 1500 - 6P AS : Y = 900

Q: the diagram, answer the following questions. a) Is the economy facing an inflationary or…

A: a. From the diagram,it could be observed that the economy is facing a recessionary gap because Y1 is…

Q: aggregate demnad and aggregate supply in market a) using an ad-as diagram, explain what happens…

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

Q: Hayek says that markets will heal themselves and that government should not intervene. How does the…

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: Price level (GDP price index 2009 = 100) Potential 130 AS GDP 120 110 100 90 AD 160 165 17.0 Real…

A: In the diagram, the potential GDP is $16.5 trillion whereas the actual GDP is $16 trillion. So, the…

Q: Figure 2: Keynes’s AD-AS Model Economics Online. (n.d.). Aggregate supply. Retrieved from…

A: Aggregate demand is the demand for all the finished goods and services in the economy. The equation…

Q: he U.S. economy is initially in short-run macro-equilibrium. Assume that China falls into a deep…

A: A recession is a macroeconomic concept that denotes a substantial drop in overall economic activity…

Q: QUESTION 2 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume…

A: In long run the economy adjusts in such manner that actual output is always equal to potential…

Q: Attached: figure 1: Hayek’s (Classical) AD-AS Model Question 1 Why does Hayek’s aggregate supply…

A: 1.In the economic model such as the one explained by Hayek, there will be a vertical supply curve in…

Q: A fall in the price level that causes a change in the real value of wealth results in a) a downward…

A: Aggregate demand curve shows a negative relationship between price level and the real output in an…

Q: Most economists reason that an economy adjusts to inflationary and recessionary gaps slowly because…

A: Inflationary gap occurs when the actual GDP is above the potential level. Recessionary gap occurs…

Q: Use an aggregate demand (AD) and aggregate supply (AS) model to respond to the following questions.…

A: please find the answer below.

Q: V. Consider an economy with output equal to the natural level of output. Now suppose there is an…

A: find below the answer.

Q: Suppose an economy is hit by natural disaster and its natural resources decreases. Show graphically…

A: The AS-AD {"aggregate supply- aggregate demand"} model is described as a way of depicting the…

Question

In a classical AD-AS macro equilibrium:


Answers:	A. Aggregate quantity demanded equals SR and LR aggregate quantity supplied.
	B. The equilibrium price level and rate of output are both stable.
	C. Buyers' and sellers' intentions are compatible.
	D. All of the above.

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

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)
Analyzing Macroeconomic Events with the IS-MP Diagram. Consider the following events in the macroeconomy. Show how to think about them using the IS-MP diagram. For each, explain how and why GDP in the United States is affected in the short run and show how the central bank should respond if it wishes to stabilize output. (a) The government offers a temporary investment tax credit: for each dollar of investment that firms undertake, they get a credit that reduces the taxes they pay on corporate income. (b) A housing bubble bursts, so that housing prices fall by 20% and new home sales drop sharply. (c) A resurgence of growth in Japan leads to an unexpected increase in the demand by Japanese consumers for U.S. goods.
Construct the AD, SRAS, and LRAS curves for an economy experiencing 1. full employment 2. an economic boom, 3. a recession. What will happen in each case if it's only temporary? What will happen in each case if it's permanent?
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.
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 labor
According to classical macroeconomic theory, a. the price level is sticky in the short run and it plays only a minor role in the short-run adjustment process. b. for any given level of output, the interest rate adjusts to balance the supply of, and demand for, money. c. output is determined by the supplies of capital and labor and the available production technology. d. All of the above are correct.
Question 1 a) Give the definition of GDP and explain what items are not included in its calculation? b) How is GDP calculated using the expenditure approach? c) How is GDP calculated using the income approach? d) Explain the problem of "double-counting" and how it can be avoided in calculating GDP Question 2 Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of an increase in government spending and a decrease in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis.
importance of aggregate demand in macro economics and importance in Indian economy ?
ASAP Consider the two-period real intertemporal model with investment from Chapter 11.(a) What does the aggregate supply curve, Y s, represent ? Derive the aggregate supply curve, Y s, using diagrams.
There are three big issues in macroeconomics – national output, unemployment, and inflation. Briefly explain how each of these issues reflects an aspect of the economic situation for a given country, at a given time. How are GDP, unemployment, and inflation interconnected? Consider this from a Keynesian perspective.
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
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.