MACROECONOMICS (LOOSELEAF)-PACKAGE
13th Edition
ISBN: 9781337492317
Author: Baumol
Publisher: CENGAGE L
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Chapter 10, Problem 2DQ
To determine
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MACROECONOMICS (LOOSELEAF)-PACKAGE
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- What is the recessionary gap and inflationary gap? Explain the following concepts in detail. Use formulas or diagrams that could complete your description.arrow_forwardWhat is meant by an economys self correcting mechanism? Explain the process through which self correcting mechanism reduces inflationary gaparrow_forwardDefine what economists mean when they use the word: “recession”?arrow_forward
- Explain two ways in which a recession might raise the natural rate of unemployment (Macroeconomics field of question)arrow_forwardExplain any two causes of deflationary gap in an economy?arrow_forwardMost economists reason that an economy adjusts to inflationary and recessionary gaps slowly because are fixed in the short run. Consumer preferences Тахes Wages Supplies of most of the inputsarrow_forward
- Use aggregate supply and demand diagrams to explain what would happen to GDP and inflation in the following: governmant expenditures have increased to fight terrorism after 9/11.arrow_forwardExplain how real GDP is determined when the price level is fixed.arrow_forwardBased on the articles “Unemployment Claims Remain Historically High” and “US Consumer Spending Rose More Slowly in July” from the August 27, 2020 and August 28, 2020 issues of the wall Street Journal, respectively, please respond to the following questions: a. What do you think caused the substantial reversal in consumer spending after the dramatic drop during March and April of 2020? Illustrate graphically how would that have affected the consumption schedule. b. What seems to be possible reasons why consumer spending has slowed down in July and August? Are these factors consistent with some of the non-income determinants of consumption discussed in the text? If so, which ones? c. Investment spending also fell dramatically during the second quarter of 2020. What shifters in the investment demand curve seem to be important here? d. Given your answer to part c, explain and illustrate graphically using the investment demand curve diagram why a Federal Reserve policy of lower interest…arrow_forward
- Consider an economy that targets an inflation rate of 2 percent. After reviewing economic changes, the government changes the target rate to 3 percent. As a result, the MPRC will Group of answer choices get steeper shift leftward get flatter shift rightwardarrow_forwardAre people necessarily worse off when the price level rises at the same rate as their income?arrow_forwardDuring July 2020, Japan’s u was 2.6%; economists have estimated that Japan’s un is 2.5%. If Japan has an accelerationist PC, what would have happened to Japan’s inflation rate during July? Illustrate fully by showing where Japan was functioning using the appropriate graph. Make all your assumptions clear.arrow_forward
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