Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 12, Problem 2P
Subpart (a):
To determine
Aggregate supply and its three time horizons.
Subpart (b):
To determine
Aggregate supply and its three time horizons.
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Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown below: a. Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output? Explain.b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250?c. Suppose that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate demand curve as AD1. What factors might cause this change in aggregate demand? What is the new equilibrium price level and level of real output?
For the linear IS-LM model, the goods market and the money market are in equilibrium when. Suppose that the economy is characterized by the following equations: (Y;r) = ( 1200 ; 6), Y-C-IG=0, C-Co-c(Y-T)=0,I-Io+hr=0, and kY-ur-M^s=0, which are satisfied for Co=60, lo=150, G=250, T=200, M^s=60, with the parameters c=0.8, k=0.1, h=10, and u=10. How are the equilibrium
and affected,
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Chapter 12 Solutions
Macroeconomics
Ch. 12.7 - Prob. 1QQCh. 12.7 - Prob. 2QQCh. 12.7 - Prob. 3QQCh. 12.7 - Prob. 4QQCh. 12.A - Prob. 1ADQCh. 12.A - Prob. 2ADQCh. 12.A - Prob. 1ARQCh. 12.A - Prob. 2ARQCh. 12.A - Prob. 1APCh. 12.A - Prob. 2AP
Ch. 12 - Prob. 1DQCh. 12 - Prob. 2DQCh. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - Prob. 5DQCh. 12 - Prob. 6DQCh. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - Prob. 9DQCh. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5P
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Similar questions
- Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?arrow_forwardSuppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..arrow_forwardSuppose that a hypothetical economy has the following relationship between its real output and the input quantities necessary for producing that output: a. What is productivity in this economy?b. What is the per-unit cost of production if the price of each input unit is $2?c. Assume that the input price increases from $2 to $3 with no accompanying change in productivity. What is the new per-unit cost of production? In what direction would the $1 increase in input price push the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?d. Suppose that the increase in input price does not occur but, instead, that productivity increases by 100 percent. What would be the new per-unit cost of production? What effect would this change in per-unit production cost have on the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?arrow_forward
- Over the last couple of years, food prices have increased substantially. Present two separate supply-demandanalyses to explain why the observed price increases could come from two fundamentally different causes.In one of your analyses, show that some “negative supply side shock”, like the Covid lockdowns that disruptedsupplies of goods and services, could have caused the observed increase in prices. In your other analysis,show that some “positive demand side shock”, like the large increases in government spending associatedwith Covid, could have caused the observed increases in prices. For full credit, identify how the results of thetwo analyses differ, and explain how you could use that difference to decide which type of shock was moresignificant in terms of explaining the observed price increases.arrow_forwardIt is known that the aggregative economic variables are as follows: Cash demand for speculation : L2 = 100 - 400r The amount of money in circulation = 200 Money demand for transactions and in case: L1 = 0.2Y Savings : S = -110 + 0.2Yd Investment: I = 150 - 600r Tax Tx = 12.5 + 0.25Y Government Expenditure: G = 160 Question : a. calculate the interest rate and national income at the time of general equilibrium? b. How much money is demand for speculation? c. What is the investment volume on balance?arrow_forwardGiven the following information about each economy , either calculate the missing variable or determine that it cannot be calculated . [LO 7.2,7.3] a. If C=\$20.1 billion, I=\$3.5 billion G=\$5.2 billion, and NX=-\$1 billion, what is total income ? b. If total income is $1 trillion G=\$0.3 tr trillion , and C=\$0.5 trillion , what is I? c. If total expenditure is $675 billion, C=\$433 billion , I = $105 billion , and G=\$75 billion , what is NX ? How much are exports ? How much are imports?arrow_forward
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