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Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. a. Demonstrate how the firm will respond to a negative demand shock. Assume prices are flexible. Instructions: Use the tool provided, 'S Flexible Prices', to draw the supply curve when prices are flexible. Then use the tool provided, 'D Negative Shock', to illustrate the shift in the aggregate demand curve when there is a negative demand shock. Computer Market Tools S Flexible Pric D Negative Sh $1,200 Demand 900 Computers per week b. Generalizing from the computer market specifically to the economy as a whole, what will happen when this negative demand shock occurs across the economy's many markets? O Real GDP will stay the same, prices will decrease, and unemployment will increase. Real GDP will increase, prices will increase, and unemployment will decrease. O Real GDP will stay the same, prices will decrease, and unemployment will stay the same. O Real GDP will decrease, prices will increase, and unemployment will increase. Price

Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. a. Demonstrate how the firm will respond to a negative demand shock. Assume prices are flexible. Instructions: Use the tool provided, 'S Flexible Prices', to draw the supply curve when prices are flexible. Then use the tool provided, 'D Negative Shock', to illustrate the shift in the aggregate demand curve when there is a negative demand shock. Computer Market Tools S Flexible Pric D Negative Sh $1,200 Demand 900 Computers per week b. Generalizing from the computer market specifically to the economy as a whole, what will happen when this negative demand shock occurs across the economy's many markets? O Real GDP will stay the same, prices will decrease, and unemployment will increase. Real GDP will increase, prices will increase, and unemployment will decrease. O Real GDP will stay the same, prices will decrease, and unemployment will stay the same. O Real GDP will decrease, prices will increase, and unemployment will increase. Price

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter15: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
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Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. a. Demonstrate how the firm will respond to a negative demand shock. Assume prices are flexible. Instructions: Use the tool provided, 'S Flexible Prices', to draw the supply curve when prices are flexible. Then use the tool provided, 'D Negative Shock', to illustrate the shift in the aggregate demand curve when there is a negative demand shock. Computer Market Tools S Flexible Pric D Negative Sh $1,200 Demand 900 Computers per week b. Generalizing from the computer market specifically to the economy as a whole, what will happen when this negative demand shock occurs across the economy's many markets? O Real GDP will stay the same, prices will decrease, and unemployment will increase. O Real GDP will increase, prices will increase, and unemployment will decrease. O Real GDP will stay the same, prices will decrease, and unemployment will stay the same. O Real GDP will decrease, prices will increase, and unemployment will increase. Price
Transcribed Image Text:Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. a. Demonstrate how the firm will respond to a negative demand shock. Assume prices are flexible. Instructions: Use the tool provided, 'S Flexible Prices', to draw the supply curve when prices are flexible. Then use the tool provided, 'D Negative Shock', to illustrate the shift in the aggregate demand curve when there is a negative demand shock. Computer Market Tools S Flexible Pric D Negative Sh $1,200 Demand 900 Computers per week b. Generalizing from the computer market specifically to the economy as a whole, what will happen when this negative demand shock occurs across the economy's many markets? O Real GDP will stay the same, prices will decrease, and unemployment will increase. O Real GDP will increase, prices will increase, and unemployment will decrease. O Real GDP will stay the same, prices will decrease, and unemployment will stay the same. O Real GDP will decrease, prices will increase, and unemployment will increase. Price
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Negative demand shock means the shocks which shift the demand curve to the left. 

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