MACROECON ETXT W/MYECONLAB+STDNT PKT>CI
7th Edition
ISBN: 9780136547853
Author: HUBBARD/TIERNE
Publisher: PEARSON C
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Chapter 13, Problem 13.1.6PA
To determine
The factor which causes movement along the AD and shift in AD.
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In the year 2027, aggregate demand and aggregate supply in the imaginary country of Daisen-Oki are represented by the curves AD2027AD2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled ADAADA curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled ADBADB, resulting in the outcome given by point B.
Suppose the unemployment rate is 7% under one of these two outcomes and 5% under the other. Based on the previous graph, you would expect (outcome A/outcome B) to be associated with the higher unemployment rate (7%).
If aggregate demand is low in 2028, and the economy is at outcome A, the inflation rate between 2027 and 2028 is .
Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and…
Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose potential GDP (LRAS) equals to $2,700 are given by the table.
Now suppose aggregate demand increases by $700 at each price level; for example, the new aggregate demanded at a price level of 50 now equals to $4,200. Add a column of the new aggregate demanded at each price level in the above table. Plot a new AD curve (on the same graph you got in a.) and label the new equilibrium on the same graph.
State the new short-run equilibrium price level and real GDP at.
How will the shift in AD change the original output, price level, and employment?
Name one factor that can cause the increase in aggregate demand and the shifting of the curve.
According 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 C
Chapter 13 Solutions
MACROECON ETXT W/MYECONLAB+STDNT PKT>CI
Ch. 13 - Prob. 13.1.1RQCh. 13 - Prob. 13.1.2RQCh. 13 - Prob. 13.1.3RQCh. 13 - Prob. 13.1.4PACh. 13 - Prob. 13.1.5PACh. 13 - Prob. 13.1.6PACh. 13 - Prob. 13.1.7PACh. 13 - Prob. 13.1.8PACh. 13 - Prob. 13.1.9PACh. 13 - Prob. 13.1.10PA
Ch. 13 - Prob. 13.2.1RQCh. 13 - Prob. 13.2.2RQCh. 13 - Prob. 13.2.4RQCh. 13 - Prob. 13.2.5RQCh. 13 - Prob. 13.2.6PACh. 13 - Prob. 13.2.7PACh. 13 - Prob. 13.2.8PACh. 13 - Prob. 13.2.9PACh. 13 - An article in the Economist noted that the...Ch. 13 - Prob. 13.2.11PACh. 13 - Prob. 13.2.12PACh. 13 - Prob. 13.2.13PACh. 13 - Prob. 13.2.14PACh. 13 - Prob. 13.2.15PACh. 13 - Prob. 13.3.1RQCh. 13 - Prob. 13.3.2RQCh. 13 - Prob. 13.3.3RQCh. 13 - Prob. 13.3.4PACh. 13 - Prob. 13.3.5PACh. 13 - Prob. 13.3.6PACh. 13 - Prob. 13.3.7PACh. 13 - Prob. 13.3.8PACh. 13 - Prob. 13.3.9PACh. 13 - Prob. 13.3.10PACh. 13 - Prob. 13.4.1RQCh. 13 - Prob. 13.4.2RQCh. 13 - Prob. 13.4.3RQCh. 13 - Prob. 13.4.4PACh. 13 - Prob. 13.4.5PACh. 13 - Prob. 13.4.6PACh. 13 - Prob. 13.4.7PACh. 13 - Prob. 13.4.8PACh. 13 - Prob. 13.4.9PACh. 13 - Prob. 13.4.10PACh. 13 - Prob. 13.2RDECh. 13 - Prob. 13.1CTECh. 13 - Prob. 13.2CTE
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- The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion. Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand. Change required to increase AD Expected rate of return on investment. (decrease/increase) Incomes in other countries (decrease/increase) Consumer expectations about future profitability. (improve/worsen) Government spending (increase/decrease)arrow_forwardUse the following graph to answer the next question. Which of the following factors will shift AD1 to AD2? A decrease in consumer wealth An increase in expected returns on investment An increase in real interest rates An increase in productivityarrow_forwardName some factors that could cause AD to shift, and say weather they would shift AD to the right or to the left.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_forwardcan you expand on the question and provide a demand and supply diagram relating to the topic "disequilibrium"arrow_forwardDepict in the AD-AS model, an economy exhibiting a short run equilibrium with a negative output gap resulting from a decline in AD caused by falling investment spending. What is true about the level of unemployment in this circumstance? What is true about the utilization of capital in this circumstance? What are the implications of your statements in parts a and b for long run adjustments in resource prices? How will these changes in resource prices impact the economy in the long run? Depict this change in your graph.arrow_forward
- The following graph plots aggregate demand (AD2027AD2027) and aggregate supply (AS) for the imaginary country of Cotopaxi in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will be given by the curve labeled ADAADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate demand in 2028 will be given by the curve labeled ADBADB, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 2027 and 2028, depending on whether the economy moves from the initial price level of 102 to the…arrow_forwardOn the following graph, plot the aggregate demand curve that results from varying the price level from 110 to 130 to 150, holding all else equal.arrow_forwardWhat is the difference between the Keynesian zone, neoclassical zone, and intermediate zone in the AD/AS model? For each, predict the impact that an increase in aggregate demand would have on the price level relative to real GDP in each of those zones. How does the AD/AS model explain economic growth, recessions, as well as changes in unemployment and inflationary pressures?arrow_forward
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