MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Question
Chapter 12.7, Problem 2QQ
To determine
Reason for upward supply curve.
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Students have asked these similar questions
1. If the president announced a plan to start a war on Iran, this would
a. shift the LRAS to the right
b. shift the Agg D curve to the right
c. shift the LRAS to the left
d. answers b or c might be true
2. The agg D curve might shift to the left if
a. interest rates went up
b. interest rates went down
c. the price level went up
d. the price level went down
3) Using IS-LM, AS-AD and labor market curves, explain a recession caused by a decrease in investment spendings.
please. full answer
Assume that prices and wages adjust rapidly so that the markets for labor, goods and assets are always in equilibrium. What is the effect of a temporary increase in government purchases (G) on;
real wage (w),
full employment level of employment (LF)
real output (YF),
the real interest rate (r),
current price level (P)
inflation (Π)
amount of investment (I)?
Please explain with details how and why the change in a temporary increase in government purchases (G) affects each market (labor, goods and assets markets) by using graphs.
Chapter 12 Solutions
MACROECONOMICS (LL)
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
- Consider the economy of XYZ, has the following indicators in the table below:Ct = 0.7Yt̅Gt = 0.2Yt̅EXt = 0.20Yt̅IMt = 0.25Yt̅It = 0.30 − 2.0(Rt − 1.2)Yt̅A. Derive the IS equation. Explain why the IS curve has downward slope.B. Estimate the short-run output when real interest rate equals to 2 percent.C. Calculate the value of multiplier and interpret the result.D. Suppose the government increases the expenditure such as:Gt = 0.3Yt̅Show the impact on IS curve in graphically, and calculate the government expenditure multiplier.How much short-run output change? Explain the reason.arrow_forwardpolicy one : increase government spending policy two : reduce tax and increase money supply for the same amount (dollar for dollar) in the LONG TERM using the IS/LM diagram, which policy would result in a lower r real interest rate (higher investment)arrow_forwardQuestion 1) a) In panel (a) the curve shifts upward, what could cause this? O Increase in G (govermment spending)O Decrease in HH wealth due to a decrease in housing pricesO An increase in the overall price levelo Areduction in govemment spending (G) b) Using Figure 2, if this economy is currently at Y1 and consumer wealth increases, then___O AD1 will shift to the left, reflecting a decrease in the real GDP at every price level.O AD1 willshift to the right. reflecting an increase in the real GDP at every price level.O an upward movement along the AD1 wiltake place., reflecting an increase in the price level.O a downward movement along the AD1 will take place, reflecting a decrease in the price level.arrow_forward
- Consider the following economy: Labor supply: Nt= 90 Capital stock: Kt = 90 Government spending: Gt = 20 Tax collections: Tt = 20 Production function: Yt = 2(Kt)0.5 (Nt)0.5 Real money demand Lt = 2Yt - 200rt Consumption function: Ct = 16 + 0.8(Yd)t Domestic price level: Pt = 4 Investment function: It = 25 - 50rt Nominal money supply: Mt = 1296 Plot (a)-(d) on the IS-LM and AD-SRAS-LRAS diagrams. Make sure to label (i) the axes, (ii) the curves and (iii) the initial equilibrium levels.arrow_forwardSuppose the government provides incentives (e.g. lower company tax) to firms that engage in high levels of research and development.How would this affect firms’ allocation between different types of investment? Explain. How would this affect the interest rate? Explain. What happens to the quantity of investment overall? Explain.What happens to the short-run aggregate supply curve? Explain. What happens to the long-run aggregate supply curve? Explain. What happens to the value of the dollar? Explain.g What happens to the quantity of net exports demanded? Explain.h What happens to aggregate demand? Explain.arrow_forward18 - : If aggregate demand increases in an economy while aggregate demand is constant in the short run, which of the following statements is correct for the new equilibrium point?A) price decreases and national income increasesB) price rises national income risesC) price increases and national income does not changeD) price goes up and national income goes downE) price decreases and national income decreases.19 - : In which of the following expressions is the equation of change given correctly?A) MV=VK B) MT=PV C) MV=PT D) MP=VY E) MV=Parrow_forward
- Through bond purchases, a nation's central bank injects money into the economy. One of the short-term effects is to drive the price level from 100 up to 104.2. Other short-term effects occur as well, but these fade in the long run, even as the price level climbs still higher.Model the short- and long-term effects in the graph below by dragging one or more curves to new positions. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardAn inflationary gap occurs when: * a. we need to increase prices b. real output is too low. c. potential output exceeds actual output. d. actual output exceeds potential output.arrow_forward7. Assume that the economy is initially operating at the natural level of output. An increase in consumer confidence will cause. A) a reduction in the real wage in the medium run. B) an increase in the real wage in the medium run. C) no change in the real wage in the medium run. D) ambiguous effects on the real wage in the medium run. E) none of the abovearrow_forward
- ax policy is one used not only for economic purposes but also for political purposes. It is the opinion of some economists and politicians that the rich should pay more of their income in taxes, and that the resulting fairness from this rise in taxes will lead to more economic growth and a rise in employment. Using the simple expenditure model (Y and Ep, not IS-LM) answer these two questions: One, would a lump-sum tax increase on many high-income households cause GDP to rise in the short run as predicted by the politicians? Why or why not? And two, are there macroeconomic conditions in the simple model under which such a tax increase would be fully warranted? Draw the graphs and explain the outcomes for both cases.arrow_forwardB. Using the IS curve, explain the determinants of the slope and position of the curve. (C). Explain the position and policy implications of the keynesians and classical economists regarding the nature of the IS curve.arrow_forwardExpectations often play cruel jokes on the market participants. Assume that everyone (buyers and sellers) expect future gold prices to increase. Use the four-step process of finding equilibrium, please be sure to describe what (if anything) happens to the current demand and/or supply of gold, which way(s) do the corresponding curve(s) shift, and what happens as a result to the equilibrium price and quantity of gold exchanged.arrow_forward
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