Macroeconomics (9th Edition)
9th Edition
ISBN: 9780134167398
Author: Andrew B. Abel, Ben Bernanke, Dean Croushore
Publisher: PEARSON
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Chapter 10, Problem 8RQ
To determine
To Explain: The impact a
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Chapter 10 Solutions
Macroeconomics (9th Edition)
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- Name some factors that could cause AD to shift, and say whether they would shift AD to the tight or to the left.arrow_forwardWhat is true about equilibrium price level? a. There will be some surplus in the economy b. There will be some shortages in the economy c. There will be either surplus or shortages in the economy d. There will be neither surplus nor shortages in the economyarrow_forwardOther things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expectedeffects on the equilibrium price level and the level ofreal output.a. A reduction in the economy’s real interest rate.b. A major increase in federal spending for healthcare (with no increase in taxes).c. The complete disintegration of OPEC, causing oilprices to fall by one-half. d. A 10 percent reduction in personal income taxrates (with no change in government spending).e. A sizable increase in labor productivity (with nochange in nominal wages).f. A 12 percent increase in nominal wages (with nochange in productivity).g. A sizable depreciation in the international value ofthe dollar.arrow_forward
- What happens when firms and workers underestimate future prices in the economy? Focus your answer on what would happen to actual output as opposed to the expected potential output. (Course is macroeconomics).arrow_forwardAccording to the two graphs, a decrease in the aggregate price level would cause a shift from: a. A to B b. B to C c. C to B (WRONG ANSWER) d. A to Carrow_forwardDiagrammatically represent the effect on the price level and real GDP in the short run of each of the following : a. An increase in wealth b.an increase in wage rates C. An increase in labour productivityarrow_forward
- Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of money increases and the increase is not anticipated; that is, the price level is not expected to change.arrow_forwardIn your own words, explain why aggregate demand is inversely related to the price level. Why does the explanation for the inverse relationship between price and quantity demanded for the aggregate demand curve differ from that of a demand curve for a specific good?arrow_forwardUse the sticky-wage theory of aggregate supply to explain what will happen to output and the price level in the long run (assuming no change in policy). What role does the expected price level play in this adjustment? Be sure to illustrate your analysis in a grapharrow_forward
- The table below shows information on aggregate supply, aggregate demand and the price level for the imaginary country of Xurbia. Price Level AD AS 110 700 600 120 690 640 130 680 680 140 670 720 150 660 740 160 650 760 170 640 770 Plot the AD/AS diagram from the data shown (Don't have to show graph but do draw it to help you answer the questions). a. Identify the equilibrium. b. Imagine that as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium. c. How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?arrow_forwardWhat effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant. a. The expectation of rapid inflation b. A 10 percent reduction in personal income tax rates c. A sizable increase in labor productivity (with no change in nominal wages) d. A 12 percent increase in nominal wages (with no change in productivity) e. Depreciation in the international value of the dollar.arrow_forwardIf firms become more optimistic about the future of the economy and, at the same time, innovation in 3-D printing makes most workers more productive,what is the combined effect on output, employment, and the price-level?arrow_forward
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