the long run. The initial full-employment level of output is y-900 and the Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible initial price level is P=100. The aggregate demand curve is given by y=1500 -6P. Scenario 2, short run: A major earthquake destroys a part of the economy's capital stock and reduces the full-employment level of output shifts to y = 880, In the short run, the output is and the price level is

the long run. The initial full-employment level of output is y-900 and the Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible initial price level is P=100. The aggregate demand curve is given by y=1500 -6P. Scenario 2, short run: A major earthquake destroys a part of the economy's capital stock and reduces the full-employment level of output shifts to y = 880, In the short run, the output is and the price level is

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter10: Aggregate Demand And Supply

Section10.A: The Self Correcting Aggregate Demand And Supply Model

Problem 10SQ

See similar textbooks

Similar questions

Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose potential GDP (LRAS) equals to $2,700 are given by the table. Now suppose aggregate demand increases by $700 at each price level; for example, the new aggregate demanded at a price level of 50 now equals to $4,200. How will the shift in AD change the original output, price level, and employment? Name one factor that can cause the increase in aggregate demand and the shifting of the curve.
Use the basic AD-AS model to illustrate and describe the effect of unexpected increase in the oil prices on macroeconomic equilibrium output, price level and (un)employment in short-run. Additionally, also explain graphically, how the economy adjusts back to long-run equilibrium.
Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose potential GDP (LRAS) equals to $2,700 are given by the table. 1.According to the macroeconomic perspectives, which zone is the short-run equilibrium falling into? 2.Would you expect unemployment rate of this economy to be relatively high or low, and explain why? What about the price level, a large or small concern, and why? 3. Now suppose aggregate demand increases by $700 at each price level; for example, the new aggregate demanded at a price level of 50 now equals to $4,200. Add a column of the new aggregate demanded at each price level in the above table. Plot a new AD curve (on the same graph you got in a.) and label the new equilibrium on the same graph.
n the AD-AS model, assume that an economy’s aggregate demand, denoted by QD=400−P, and SR aggregate supply, denoted by QS=P, currently intersect at price level = $200 and the full employment output level = 200. What curve would have shifted if a new short-run equilibrium were to occur at an output level of 300 and a price level of $300? Group of answer choices SRAS shifts leftward. AD shifts leftward. SRAS shifts rightward. AD shifts rightward.
Please explain why the long-run aggregate supply curve is vertical. What variable causes the short-run aggregate supply curve to shift? Please identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left. What is the relationship among the AD, SRAS, and LRAS curves when the economy is in macroeconomic equilibrium?
Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run?a. An increase in aggregate demand.b. A decrease in aggregate supply, with no change in aggregate demand.c. Equal increases in aggregate demand and aggregate supply.d. A decrease in aggregate demand.e. An increase in aggregate demand that exceeds an increase in aggregate supply.
The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion. Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand. Change required to increase AD Expected rate of return on investment. (decrease/increase) Incomes in other countries (decrease/increase) Consumer expectations about future profitability. (improve/worsen) Government spending (increase/decrease)
Explain, using the AD-AS model, the effect of an increase in investment in themacroeconomy on the equilibrium price level and the equilibrium level of output.(10)Q.1.2 Can demand management policies be used to combat stagflation? Explain youranswer.(2)Q.1.3 Identify three ways in which aggregate supply could decrease in an economy.
We 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…
The Australia Federal Government established a AUD 2 billion grant to help sectors affected by the bushfires to get the support they needed to recover. Use the Aggregate Demand and Aggregate Supply Model below to answer the questions that follow. a) Using the Aggregate Demand and Aggregate Supply Model did the 2019/20 cause economic expansion or economic contraction in Australia. Name at least three sectors that were affected by the bushfires and examine the impact of the bush fires to the economy of Australia. b) Employ the Aggregate Demand and Aggregate Supply Model to explain the benefits of the Australia government AUD2 billion grant to the economy.
Assume that the long-run aggregate supply curve is vertical at Y = 3.000 while the short-run aggregate supply curve is horizontal at P=1.0, . The aggregate demand curve is Y = 2(M / P) and M = 1,500. a. If the is initially in long-run equilibrium, what are the values of P and Y? Draw the equilibrium using AD and short and long run AS curves.
For each set of conditions given, use the aggregate supply – aggregate demand model to indicate what will happen to the price level and quantity of real domestic output (GDP). Assume prices are flexible in both directions, unless directed otherwise. Be mindful of the time periods mentioned that align with the three versions of aggregate supply. Price Real Level GDP ____ ____ 1. Consumer wealth decreases in the immediate short run. ____ ____ 2. Government spending decreases in the short run. ____ ____ 3. Domestic resource prices increase in the short run.