The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $5 trillion. The curves are labelled a, b, c, and d. Three points on the graph are also indicated by grey stars and labelled K, L, and M. 100 90 80 M. 70 60 50 40 30 20 1 3 5 7 4 REAL GDP (Trillions of dollars) Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the gra choose Not Shown. Description Not Shown a Long-run aggregate supply (LRAS) Short-run aggregate supply (SRAS) when the economy is at long-run equilibrium Short-run aggregate supply (SRAS) when there is an inflationary gap Short-run aggregate supply (SRAS) when there is a recessionary gap Aggregate demand (AD) PRICE LE VEL

The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $5 trillion. The curves are labelled a, b, c, and d. Three points on the graph are also indicated by grey stars and labelled K, L, and M. 100 90 80 M. 70 60 50 40 30 20 1 3 5 7 4 REAL GDP (Trillions of dollars) Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the gra choose Not Shown. Description Not Shown a Long-run aggregate supply (LRAS) Short-run aggregate supply (SRAS) when the economy is at long-run equilibrium Short-run aggregate supply (SRAS) when there is an inflationary gap Short-run aggregate supply (SRAS) when there is a recessionary gap Aggregate demand (AD) PRICE LE VEL

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.8P

See similar textbooks

Similar questions

Name some government policies that cod cause aggregate demand to shift.
On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive than substitute products. Explain why aggregate demand does not increase for the same reason in response to a decrease in the aggregate price level. In other words, what causes total spending to increase if it is not because goods are now cheaper?
Name some economic events not related to government policy that could cause aggregate demand to shift.
Question: How does the concept of aggregate demand relate to overall economic output, and what factors can influence changes in aggregate demand? A) Aggregate demand represents the total wealth of a nation and is unaffected by external factors. B) Aggregate demand is the total spending in an economy and includes consumption, investment, government spending, and net exports; factors like changes in consumer confidence can influence it. C) Aggregate demand solely considers government spending and is unrelated to economic output. D) Aggregate demand is the total production in an economy and is determined solely by government policies.
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…
During 2008, the United States began to experience what has become known as the Financial Crisis. The Financial Crisis resulted in a drop in housing prices and negatively shocked AD resulting in unemployment. Real GDP fell from $13.64 Trillion to $13.26 Trillion. (Here is a link to Google Data’s Real GDP graph: Google Data - Real GDP. Be sure to fully answer each question in your response. 1. Describe the problem in context of an Aggregate Demand/Aggregate Supply model. What happened to equilibrium output and the price level? 2. Design a fiscal policy tool using government spending or the tax system that would attempt to fix the problem. Describe that fiscal policy tool in complete detail. Why did you choose that particular method? The reduction in GDP was about $380,000,000,000 (Three hundred and eighty billion dollars.) 3. With this large of a drop, what size fiscal policy tool would your recommend? How does the multiplier play into things? 4. What are potential…
During 2008, the United States began to experience what has become known as the Financial Crisis. The Financial Crisis resulted in a drop in housing prices and negatively shocked AD resulting in unemployment. Real GDP fell from $13.64 Trillion to $13.26 Trillion. (Here is a link to Google Data’s Real GDP graph: Google Data - Real GDP. Be sure to fully answer each question in your response. 1. Describe the problem in context of an Aggregate Demand/Aggregate Supply model. What happened to equilibrium output and the price level? 2. Design a fiscal policy tool using government spending or the tax system that would attempt to fix the problem. Describe that fiscal policy tool in complete detail. Why did you choose that particular method? The reduction in GDP was about $380,000,000,000 (Three hundred and eighty billion dollars.) 3. With this large of a drop, what size fiscal policy tool would your recommend? How does the multiplier play into things? 4. What are potential…
Construct an Aggregate Supply and Aggregate Demand model where AS and AD are in equilibrium at potential GDP at a price level of 110 and Real GDP of $13.0 trillion dollars. Be sure to label all parts of the graph. a. Graph the initial effects of a recession that causes AD to decrease and real GDP to fall $0.5 trillion. b. Explain what will happen in the long run if nothing is done. c. If the government wanted to intervene in the economy, explain the Fiscal Policy measures that can be used to bring real GDP back to potential.
Using a macroeconomics demand/supply analysis, where do you think current output is relative to what the economy is capable of producing? Look at recent trends in the data. What are the recent trends in the components of aggregate demand (consumption spending, investment spending, government purchases, and exports and imports?
Consider a hypothetical economy in which households spend $0.75 of each additional dollar they earn and save the remaining $0.25. The following graph shows the economy's initial aggregate demand curve (AD1AD1). Suppose the government increases its purchases by $3.75 billion.
18 - : If aggregate demand increases in an economy while aggregate demand is constant in the short run, which of the following statements is correct for the new equilibrium point?A) price decreases and national income increasesB) price rises national income risesC) price increases and national income does not changeD) price goes up and national income goes downE) price decreases and national income decreases.19 - : In which of the following expressions is the equation of change given correctly?A) MV=VK B) MT=PV C) MV=PT D) MP=VY E) MV=P
From the information below calculate aggregate demand; Consumption (C) = $200 + 0.6Y Investment (I) = $300 Government (G) = $100 Net Export (NX) = $50 Which one of the following statements about Consumption and Aggregate Demand is CORRECT when the economy achieves equilibrium GDP? a. One is 350 greater than the other b. One comprises the other c. They are valued at $1025 and $1375, respectively d. They are valued at $1375 and $1025, respectively e. They are both the same