In the COMPLEX AD/AS model assume actual real GDP is $19.2 trillion, the price level (GDP Deflator) is 185 and potential real GDP is $19.7 trillion. A year later technology increases, oil prices fall, and the interest rate decreases. However, the technology "shock" will be LESS than the oil price & interest rate "shocks," but the interest rate "shock" is LESS than the oil price "shock". As a result, the price level actual real GDP

In the COMPLEX AD/AS model assume actual real GDP is $19.2 trillion, the price level (GDP Deflator) is 185 and potential real GDP is $19.7 trillion. A year later technology increases, oil prices fall, and the interest rate decreases. However, the technology "shock" will be LESS than the oil price & interest rate "shocks," but the interest rate "shock" is LESS than the oil price "shock". As a result, the price level actual real GDP

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 10SCQ: Many financial analysts and economists eagerly await the press releases for the reports on the home...

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How is long-term growth illustrated in an AD/AS model?
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?
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
6.1.What is an AD-AS model and what does such a model as per the givendiagram essentially focus on?6.2.Discuss the diagram in detail by first explaining what leads to step Step 1(representing a shift in curves on the diagram) and indicating what occursto cause shifts in some of the curves. Then discuss Step 2 (whichrepresents other macroeconomic changes) and indicate what happens toother variables when there are shifts in some of the curves as per Step 1. 6.3.What, in general, do the points of intersection between the AS and AS2curves and the AD curve show?6.4.When the LAS curve moves to the right to LRAS2, what exactly do thepoints of intersection between the AS and AS curves and the AD1 curve,indicated as point 1 and point 2, reflect on the diagram?
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.
Suppose, initially the Australian economy is at full employment (in other words the economyis at the potential GDP). Using AD-AS model, explain how would each of the following eventsaffect the economy both in the immediate and in the long term. An increase in consumer confidence.
Suppose, initially the Australian economy is at full employment (in other words the economyis at the potential GDP). Using AD-AS model, explain how would each of the following eventsaffect the economy both in the immediate and in the long term. A slowdown in China’s economic growth due to the sub-prime crisis in the US.
Suppose, initially the Australian economy is at full employment (in other words the economyis at the potential GDP). Using AD-AS model, explain how would each of the following eventsaffect the economy both in the immediate and in the long term.a) A slowdown in China’s economic growth due to the sub-prime crisis in the US
Suppose, initially the Australian economy is atfull employment(in other words the economy is atthe potentialGDP). Using AD-AS model, explain how would each of the following events aectthe economy both in theimmediate and in the long term.a) A slowdown in China’s economic growth due to the sub-prime crisis in the US.b) Union wage settlements push the wage rate up.c) An increase in consumer confidence.
Assume that an economy is initially operating at the natural rate of output (full employmentoutput). Use the AD-AS model to illustrate graphically the effects on price and output of areduction in government spending. Explain your assumptions with respect to the range ofaggregate supply of your analysis.
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