Bundle: Exploring Macroeconomics, Loose-leaf Version, 7th + LMS Integrated MindTap Economics, 1 term (6 months) Printed Access Card
7th Edition
ISBN: 9781305784802
Author: Robert L. Sexton
Publisher: Cengage Learning
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Question
Chapter 14, Problem 7P
To determine
(a)
To illustrate:
The inflationary gap on the provideddiagram.
To determine
(b)
To explain:
The final long-run equilibrium with the help of a diagram.
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The downward-sloping aggregate demand curve indicates that, ceteris paribus:
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
there is an inverse relationship between demand and the average level of prices.
a
b
a greater quantity of real GDP will be demanded at higher price levels than at lower price levels.
C
d
a decrease in the price level leads to an increase in the quantity demanded of real GDP.
inflation and output are directly related.
Assume an economy is initially operating at the natural rate of output.
a. Draw an AD-AS model. Label the initial equilibrium point as point A. Use the model to illustrate graphically the short-run effects on price and output
when the world oil price suddenly increases. Label the new equilibrium as point B.
b. What happens to inflation and unemployment in the short run?
c. Label in your diagram the long-run equilibrium point if the economy recovers on its own. Name it Point C.
d. What monetary policy should the Fed use to help the economy recover in the short run? Label the equilibrium point in your diagram if the Fed took
the proposed action. Name it Point D.
A central bank forecasts a rise in raw material costs. The government plans to increase spending
on health and education.
The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply,
AS, diagram.
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the government plans are implemented?
AS,
AS2
general
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AD, AD AD,
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Chapter 14 Solutions
Bundle: Exploring Macroeconomics, Loose-leaf Version, 7th + LMS Integrated MindTap Economics, 1 term (6 months) Printed Access Card
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