Sub-part
A
The real GDP and actual price level when the actual price level exceeds the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
B
The expansionary and recessionary Gap when the actual price level exceeds the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
C
The real GDP and actual price level when the actual price level is lower than the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
D
The expansionary and recessionary Gap when the actual price level is lower than the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
E
The real GDP and actual price level when the actual price level equals the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
F
The expansionary and recessionary Gap when the actual price level is equal to the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
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Chapter 10 Solutions
ECON MACRO
- Hydraulic fracturing (tracking) has the potential to significantly increase the amount of natural gas produced in the United States. If a large percentage of factories and utility companies use natural gas, what will happen to output, the price level, and employment as tracking becomes more widely used?arrow_forwardQUESTION 60 Aggregate supply is defined as a. the relationship between the expenditures schedule and the leakages schedule. b. the relationship between the price level and the quantity of real GDP supplied. c. how much the economy can produce at zero unemployment. d. an amount of output the economy will produce at full employment.arrow_forwardQuestion 7 The model of aggregate demand and aggregate supply Answer is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model. is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted. is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted. Question 8 When the price level falls the quantity of Answer consumption goods demanded rises, while the quantity of net exports demanded falls consumption goods demanded and the quantity of net exports demanded both rise. consumption goods demanded and the quantity of…arrow_forward
- 22. Which of the following is the technical definition of a recession? A. a fall in GDP for four consecutive quarters B. a rise in unemployment for two consecutive quarters C. a fall in GDP for two consecutive quarters D. a rise in unemployment for four consecutive quartersarrow_forwardCondition 1: National Unemployment Rate Rising,Rate of Inflation Falling Question1: Given the condition presented above,what is likely to happen to spending in the economy?Explain your answer Question2:What is the relationship between spending and output in this situation? Question3:What is likely to happen to real gross domestic product as a result of the relationship between spending and output?arrow_forward39- If aggregate demand increases while aggregate supply is constant in an economy in the short run, which of the following statements is correct for the new equilibrium point? a) price goes down national income goes down B) price falls, national income rises NS) price goes up national income does not change D) price goes up national income goes down TO) price goes up national income goes uparrow_forward
- 10 For this question, assume that all factors that effect economic growth remain constant. Suppose that the economy is initially operating at the full employment level. Consider that there is a deficit in government budget (G > T). To reduce the deficit, the government plans to increase the taxes. What will be the effect of an increase in taxes in the short-run and in the long-run? Explain the dynamics of employment, output, and prices in the short-run and in the long-run by using the AS-AD model. Illustrate your answers by drawing the relevant graphsarrow_forward9-)Suppose that government decides to support the firms for their investments in research and the development.Assuming this support increases productivity in the economy, use aggregate demand and supply analysis to predict the short-run and long-run effects on inflation and output. Show these effects on a graph and explain the results in detail. IMPORTANT NOTE FOR THE QUESTION: DESCRIPTION ≠ EXPLANATION; So please DO NOT just write like “this curve shifts right or left etc.” as an explanation (I can see it on the graph), EXPLAIN “WHY” that curve shifts right or left and clearly write “WHAT” are the short-run and the long-run RESULTS of the shift(s) on inflation and output.)arrow_forward1. Consider an economy at full employment. If consumers and firms become less optimistic about the future economy then a) price levels will rise. b) output will rise. c) unemployment will rise.arrow_forward
- 1- Examine the fundamental causes of a nation’s business cycle fluctuations. Also, examine the relationship between total spending by government and consumers in a nation and the location of the countries’ GDP on the business cycle. 2-Suppose you have $200,000 in a bank term account. You earn 5% interest per annum from this account.You anticipate that the inflation rate will be 4% during the year. However, the actual inflation rate for the year is 6%. Calculate the impact of inflation on the bank term deposit you have and examine the effects of inflation in your city of residence with attention to food and accommodation expenses. 3- Use the Aggregate supply and Aggregate Demand Model below to answer the questions that follow. Aggregate Supply and Aggregate Demand Model (i) Examine the influence of government expenditure on investment in a nation. Use Jot Inc. Ltd a multinational construction company in which you are the Chief Exec of the firm that that is highly diversified and…arrow_forwardOn 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?arrow_forward3- The lowest part of a recession is referred to as its _________. a. Depression b. Boom c. Peak d. Trougharrow_forward
Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax