Which of the following would cause AD to shift inwards? Select one: a. a fall in the rate of interest b. an improvement in economic expectations O C. a fall in government expenditure d. a decrease in direct taxation
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- INFLATION RATE LRAS AD SRAS REAL GOP GROWTH RATE Suppose a change in fiscal policy causes the AD curve to shift from AD₁ to AD2, as shown above. Which response below would most likely cause that shift? A fall in taxes OR a rise in government spending. A rise in taxes OR a rise in government spending. A rise in taxes OR a fall in government spending. A fall in taxes OR a fall in government spending.Which of the following would NOT cause a shift in AD? Select one: a. A reduction in interest rates b. A fall in the cost of production c. A reduction in income tax d. An increase in government spendingDiscuss how the AD/AS model can explain economic growth, recessions, as well as changes in unemployment and inflationary pressures. (11.5)
- Using graphical illustration of AS-AD framework, show the effects of following events on real output and price level in the economy. (A) A wave of immigration increases the labor force. (B) An earthquake destroys some of the capital stock. (C) A technological advance improves the production. (D) The government raises taxes by $100 billion. (E) Government announces an interest rate cut to encourage business investmenA) Identify - and justify with macroeconomic arguments the long-term adjustments (i.e., the possible displacements of the 3 curves identified on the graph) that can be expected, all things being equal. b) Identify - and justify with macroeconomic arguments what are the implications for: i. the inflation rate, ii. the real growth rate, iii.the unemployment rate, and iv. the output gap (i.e. the difference between realized GDP and full capacity GDP)Y5 Consider an AS-AD model for the U.S. Suppose an economic expansion in Mexico increases income for the average Mexican household. Mexico is a large trading partner with the US. This expansion would cause: a. the U.S. price level to rise and real GDP to fall. b. the U.S. price level and real GDP to increase. c. the U.S. price level to fall and real GDP to rise. d. the U.S. price level and real GDP to fall.
- Measuring Yt and Yt : A real-world problem faced by policymakers, forecasters, and businesses every day is how to judge the state of the economy. Consider the table below, showing hypothetical measures of real GDP in the coming years, starting at a level of $18.0 trillion in 2018. Now fill in the remaining columns of the table by answering the following questions. (a) What is potential output in 2018? You could call this a trick question, since there’s no way for you to know the answer! In a way, that’s the main point: fundamentally, we have to take some other measurements and make some assumptions. Suppose your research assistant tells you that in 2018, business surveys, unemployment reports, and recent years’ experience suggest that the economy is operating at potential output. So go ahead and write 18.0 for potential in this year. (b) Assume potential output grows at a constant annual rate of 2.5%, and complete the remainder of the table. (c) Comment on…Assume the following to answer the following questions: C= 1000+ .9 (Y-T) Tax rate = 0.1Y Imports = 0.1(Y-T) Government spending = 200 Investment = 300 Exports = 600 Potential Output = $8000 The economy described above is in the ["recessionary", "inflationary"] gap of the AD/AS Model.For each of the following shocksidentify what component() of planned aggregate expenditure is/ are directly affected and in which direction . a. Tax rates increase . b. China experiences an economic boom . c. become more optimistic regarding their future prospects . d . Congress decides to increase funding for education . e. German fashion designs become popular among celebrities 10