Shown on the right is an aggregate demand-aggregate supply graph of an economy initially in a long-run equilibrium at point A. Now suppose the economy experiences a negative aggregate supply shock. 1.) Using the line drawing tool, draw the new aggregate supply curve and label it as 'SRAS2'. 2.) Using the point drawing tool, identify the new short-run equilibrium point and label it as 'B'. 3.) Using the point drawing tool, identify the new long-run equilibrium point and label it as 'C'. Carefully follow the instructions above and only draw the required objects. Price Level P1 ما LRAS A AD₁ SRAS Real GDP

Shown on the right is an aggregate demand-aggregate supply graph of an economy initially in a long-run equilibrium at point A. Now suppose the economy experiences a negative aggregate supply shock. 1.) Using the line drawing tool, draw the new aggregate supply curve and label it as 'SRAS2'. 2.) Using the point drawing tool, identify the new short-run equilibrium point and label it as 'B'. 3.) Using the point drawing tool, identify the new long-run equilibrium point and label it as 'C'. Carefully follow the instructions above and only draw the required objects. Price Level P1 ما LRAS A AD₁ SRAS Real GDP

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter8: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 15QP

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ssume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affected Explain clearly in words the reasons behind the effects on Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply, as pointed out in
Assume the Australian economy is originally at the long-run equilibrium. An abrupt house price crash sends shockwaves throughout the economy. In response to such a shock, households bring their spending on durable goods to the bare minimum, while firms cancel all future upgrade or expansion projects. Required: (a) Explain how the long-run aggregate supply (LRAS), the short-run aggregate supply (SRAS) and the aggregate demand (AD) will be affected by the above shock. Clearly explain why such change(s) would occur. (b) Clearly explain how the above shock would affect the key macroeconomic variables (real GDP, unemployment rate and price level) in the short run. (c) In order to counteract the above shock, do you recommend the government to implement expansionary fiscal policy or contractionary fiscal policy? Clearly explain why. (d) Clearly explain what actions the government can undertake in order to implement the fiscal policy stance recommended in (c).
Assume that the economy is operating at or near its long‐run aggregate Identify one negative consequence that would result from a positive demand shock and two negative consequences that would result from a negative supply shock.
Assume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affected Explain clearly in words the reasons behind the effects on Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply, as pointed out in
If the economy begins at an equilibrium at potential output, a negative aggregate demand shock has which of the following effects in the short-ru? a. output and prices increase and unemployment falls below the natural rate b. output and prices increase and unemployment rises above the natural rate c. output and prices decrease and unemployment rises above the natural rate d. output and prices decrease and unemployment falls below the natural rate
a. write down the expressions for the AS and AD curves and interpret the expressions. what is the intuition behind the two curves? what must be true of the model parameters and variables in the long run equilibrium? b. analyze the effects of an oil supply shock that causes a temporary increase in the inflation, using the three-equation model. assume that the shock lasts for one period and then assumes the value 2%. describe the mechanisms that bring the economy back to long-run equilibrium. what happens to aggregate supply? c. consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. analyze the effects of a decrease in the inflation target from m to mt. explain the mechanism behind the adjustment to the new steady state.
The figure above shows the Aggregate Supply (AS) and Aggregate Demand (AD) curves for an economy that is currently at equilibrium producing Y0 units of output. What would be the result of a positive shock to AS if there is no change to AD? Question 12Select one or more: a. lower output levels b. higher price levels c. lower price levels d. higher output levels
Question 3: If an economy receives a negative demand and a negative supply shocksimultaneously, what can you conclude about the values of the price level and the RGDP at thenew equilibrium following the shocks?
Please match each of the characteristics to the situation with which they are most associated. 1.Positive demand shock 2.Negative demand shock 3.Positive supply shock 4.Negative supply shock Answer Bank SRAS curve hits to the left Stagflation AD curve shifts to the left A positive shift that leads to a lower aggregate number SRAS curve shifts right AD curve shifts right A negative shift that leads to a lower aggregate price A negative shift that leads to a higher aggregate price A positive shaft that leads to a higher aggregate price
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The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table 24.3 shows. a. Identify the (i) equilibrium basing from the AD/AS diagram attached. b. Would you expect unemployment in this economy to be relatively high or low? c. Would you expect concern about inflation in this economy to be relatively high or low? d. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. e. How will the shift in AD affect the original output, price level, and employment?
Starting from long- run equilibrium, use the basic aggregate demand and aggregate 1)supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. Beginning with long- run equilibrium, use the aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a negative supply shock. Using the aggregate supply and demand model, illustrate what happens in the long run when the economy suffers a supply shock. Begin your analysis by assuming the economyhas suffered the supply shock in the short run, but has not yet adjusted to it in the long run.run.