MindTap Economics, 1 Term (6 Months) Printed Access Card for Mceachern's ECON MACRO, 6th
6th Edition
ISBN: 9781337915595
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 10, Problem 5P
To determine
The factors that change the
Introduction:
Aggregate demand: Aggregate demand is the total amount of final goods and services demanded in the economy in a particular time period.
Aggregate Supply: Aggregate supply is the total amount of goods and services available in the economy of sell in a particular time period.
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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?
The following graph shows the short-run and long-run aggregate supply curves (SRAS and LRAS) for an economy.
Suppose there is a technological improvement that allows firms to reduce their costs of production permanently.
Drag one or both of the curves on the graph to illustrate the long-term effects of this change. If you don't believe there will be any long-term effects,
leave the curves where they are.
240
LRAS
SRAS
200
SRAS
160
LRAS
120
80
40
6
12
18
24
REAL GDP (Trillions of dollars)
Assuming aggregate demand is not affected by the technological improvement, the long-run effect of this
v supply shock
is
v in aggregate output and
v in the price level.
PRICE LEVEL
What are three factors that help explain the slope of the aggregate demand curve? What is the most important factor? Why?
Chapter 10 Solutions
MindTap Economics, 1 Term (6 Months) Printed Access Card for Mceachern's ECON MACRO, 6th
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- What are the four reasons why aggregate demand curves might shift? Briefly explain each one of them.arrow_forwardI don't quite understand what is asking of the change that will occur in the long runarrow_forwardIn an economy the aggregate demand is less than aggregate supply explain the changes that will take place in this economy.arrow_forward
- Suppose that an economy wants to boost available labor hours in order to increase aggregate supply. What is the best way to accomplish this?arrow_forwardNeed help with this. Need eveyrthing answered and please show how to do the graph. THank you !arrow_forwardThe following graph shows an aggregate demand curve (AD) illustrating the inverse relationship between the price level and the quantity of Real GDP in the United States. During World War II, the United States increased military spending. Show the effect of the following scenario on the aggregate demand curve by dragging the curve or moving the point to the appropriate position. Note: Tool tip: To move the curve, click and drag any part of the curve. The curve will snap into position, so if you try to move it and it snaps back to its original position, just try again and drag it a little farther. PRICE LEVEL Aggregate Demand I I " I 1 REAL GDP AD AD (?)arrow_forward
- What are the major components of aggregate demand? How these components impact the Aggregate Demand? Can you describe each one of them?arrow_forwardAssume the graph represents the Japanese economy during the first quarter of 2014. Use the information from the seventh paragraph of the Washington Post article Japan Recession, Europe Stagnation Cast Pall over Global Economic Outlook to demonstrate how the policies of Prime Minister Shinzo Abe affected the economy in the subsequent quarters of 2014. The graph depicts aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS). LRAS is sometimes labeled potential output.arrow_forwardWhat are the major factors causing a shift in aggregate demand (inward or outward)?arrow_forward
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