me. On the aggregate demand-aggregate supply diagram below, use the drag tool to illustrate what occurred during sion given the two causes listed above. er to the graphing tutorial for this question type, please click here. B. // Price level 15 14 13 12 10 ADE AD?AS LRASE SPASE
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- Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown in the following table Amount of Price Level Amount of Real GDP (Price Index) Real GDP Demanded, Supplied, Billions Billions $100 300 $450 200 250 400 300 200 300 400 150 200 500 100 100 a. Use the data above to graph the agregate demand and aggregate supply curves. What are the…Evaluate the following statements using relevant diagrams and provide detailedexplanations. The statements describe events that might shift aggregate demand (AD),aggregate supply (AS), both or neither. Clearly label your diagrams. A) A recent economic report suggests that consumer confidence has increased.B) Apple Inc. has announced a 50% discount on its new generation iPad devices foruniversity students.C) After a prolonged acceleration in economic activity, the government raises the rateof personal income tax.D) A continuing economic expansion has drawn in many working age people (andtheir families) from neighbouring countries in search of jobs and better lives.Suppose the table below shows the schedules for aggregate demand and short-run aggregate supply in the economy of Tipitina. Further assume that potential output in Tipitina is $200 billion. Use this information to solve the next four questions. Aggregate Quantity of Goods and Services… Price Level Demanded (in billions of $) Supplied (in billions of $) 50 $350 $250 75 300 300 100 250 330 125 200 350 150 150 360 What type of output gap is Tipitina currently facing? Indicate your answer below by writing either “inflationary”, “recessionary”, or “no gap” EXACTLY. How large is the gap? Enter your answer as a whole number. Do not put any symbols or words in your answer. Type of gap = Size of gap = $ billion
- From 1/1/2020 to 7/1/2020, real GDP decreased but the GDP deflator stayed approximately the same (thus, treat it as the same number at the beginning of this period as it was at the end of this period). According to our aggregate supply/demand analysis, which of the following must have occurred over this time frame? (Use the graph to help you see if you can determine any shift(s).) Group of answer choices a) increase in Aggregate Demand, decrease in Aggregate Supply b) decrease in Aggregate Demand, decrease in Aggregate Supply c) increase in Aggregate Demand, increase in Aggregate Supply d) increase in Aggregate Demand, but no way to determine the direction of shift in Aggregate Supply e) decrease in Aggregate Demand, increase in Aggregate SupplyThe following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion. The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change needed to decrease AD Wealth (increase/ decrease) Taxes (increase/ decrease) Expected rate of return on investment (increase/ decrease) Incomes in other countries (increase/ decrease)The following graph plots aggregate demand (AD2027AD2027) and aggregate supply (AS) for the imaginary country of Cotopaxi in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will be given by the curve labeled ADAADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate demand in 2028 will be given by the curve labeled ADBADB, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 2027 and 2028, depending on whether the economy moves from the initial price level of 102 to the…
- Identify three factors that can shift the aggregatedemand curve to the right and three different factorsthat can shift the aggregate demand curve to the leftWe can analyze the macroeconomic effects of Hurricane Katrina using the aggregate supply (AS) and aggregate demand (AD) diagram. The horizontal axis measures real GDP, a measure of the nation’s output that removes the effects of inflation. The vertical axis measures the price level (the average level of output prices). Consider Katrina’s effect of “cost shocks” – unexpected changes in the prices of important inputs (assume LRAS is unchanged). For example, Katrina unexpectedly choked off oil, natural gas, and refined gasoline supplies from the Gulf region, placing upward pressure on energy costs. The hurricane also shut down factories and businesses, reducing the nation’s productive capacity. Therefore, the effect of the higher energy prices and reduced productive capacity is to shift the __________ curve(s). Consider how the government’s fiscal policy response affects the economy. Recall that both individual consumers’ purchases and government purchases are included in aggregate…Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought. Assumption Classical Keynesian Only an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly. Product prices and wages tend to be inflexible. The following graph shows the aggregate demand (ADAD) and aggregate supply (ASAS) curves for a hypothetical economy that is currently operating below its full-employment output level. That is, the economy is currently in a recession. The aggregate supply curve (ASAS) in this diagram is consistent with the view of aggregate supply. According to this viewpoint, the government should spending in response to the recession. Shift the appropriate curve on the graph to illustrate the impact of this change in government spending. ADASPRICE LEVELREAL GDP (Trillions of dollars)AD AS The prescribed…
- Question 76 During the 2020 campaign, Joe Biden proposed raising income taxes on those earning more than $400,000 per year and raising corporate taxes from about 21 percent to 28 percent. Consider the aggregate demand-aggregate supply diagram below, which represents the macroeconomy. Suppose the market is initially at an equilibrium at point A. What effect will a tax increase have on this graph? Question 76 options: 1.The long-run aggregate supply curve will shift to the left. 2.The aggregate demand curve will shift to the right. 3.The aggregate demand curve will shift to the left. 4.The short-run aggregate supply curve will shift to the left. Question 77 During the 2020 campaign, Joe Biden proposed raising income taxes on those earning more than $400,000 per year and raising corporate taxes from about 21 percent to 28 percent. Consider the market for money illustrated in the figure below. Assume the market initially is in equilibrium at point A. What effect will the tax increase…The following graph shows the short-run aggregate supply curve (ASAS), the aggregate demand curve (ADAD), and the long-run aggregate supply curve (LRASLRAS) for a hypothetical economy. Initially, the expected price level is equal to the actual price level, and the economy is in long-run equilibrium at its natural level of output, $100 billion. Suppose a bout of severe weather drives up agricultural costs, increases the costs of transporting goods and services, and increases the costs of producing goods and services in this economy. Use the graph to help you answer the questions about the short-run and long-run effects of the increase in production costs that follow. (Note: You will not be graded on any adjustments made to the graph.) Hint: For simplicity, ignore any possible impact of the severe weather on the natural level of outputwhat are the aggregate demand consequences of Hurricane Katrinaor a war in the Middle East?