Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 14.1, Problem 3ST
(a)
To determine
The change in aggregate
(b)
To determine
The change in aggregate demand curve.
(c)
To determine
The change in aggregate demand curve.
(d)
To determine
The change in aggregate demand curve.
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How is long-term growth illustrated in an AD/AS model? Draw a graph of the AD/AS model and show the effect of long-term growth from period 1 to period 2. Include the effect of a resulting expansion of the money supply by the Fed.
Suppose velocity rises and the money supply falls.
How will things change in the AD–AS framework if a change in the money supply is completely offset by a change in velocity? Check all that apply.
The increase in velocity could shift the AD curve to the left by the same amount as the fall in the money supply shifts the AD curve to the right.
Changes in the money supply would have no effect on Real GDP, the short-run price level, nor the long-run price level.
A change in the money supply would decrease Real GDP, the short-run price level, and the long-run price level.
The increase in velocity could shift the AD curve to the right by the same amount as the fall in the money supply shifts the AD curve to the left.
Explain, with the aid of a graph, the demand-pull inflation as a cause of inflation.
(Outline the factors that cause the change in the AD curve)
Chapter 14 Solutions
Macroeconomics
Ch. 14.1 - Prob. 1STCh. 14.1 - Prob. 2STCh. 14.1 - Prob. 3STCh. 14.2 - Prob. 1STCh. 14.2 - Prob. 2STCh. 14.3 - Prob. 1STCh. 14.3 - Prob. 2STCh. 14.3 - Prob. 3STCh. 14.4 - Prob. 1STCh. 14.4 - Prob. 2ST
Ch. 14.4 - Prob. 3STCh. 14 - Prob. 1QPCh. 14 - Prob. 2QPCh. 14 - Prob. 3QPCh. 14 - Prob. 4QPCh. 14 - Prob. 5QPCh. 14 - Prob. 6QPCh. 14 - Prob. 7QPCh. 14 - Prob. 8QPCh. 14 - Prob. 9QPCh. 14 - Prob. 10QPCh. 14 - Prob. 11QPCh. 14 - Prob. 12QPCh. 14 - Prob. 13QPCh. 14 - Prob. 14QPCh. 14 - Prob. 15QPCh. 14 - Prob. 16QPCh. 14 - Prob. 17QPCh. 14 - Prob. 18QPCh. 14 - Prob. 19QPCh. 14 - Prob. 1WNGCh. 14 - Prob. 2WNGCh. 14 - Prob. 3WNGCh. 14 - Prob. 4WNGCh. 14 - Prob. 5WNGCh. 14 - Prob. 6WNGCh. 14 - Prob. 7WNGCh. 14 - Prob. 8WNG
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- 10. What does the AD curve represent economically? A. It represents the difference between actual real GDP and nominal GDP B. It describes how the Fed chooses short-run output based on inflation C. It describes how the velocity of money can fluctuate in the short run D. All of the abovearrow_forwardWhich of the following does not cause the aggregate demand curve to shift to the right? A) A tightening monetary policy. B) An investment boom C) An expansionary fiscal policy D) An expansionary monetary policyarrow_forwardBriefly explain whether each of the following statements is true or false 3. In the AD-AS model, monetary policy can stabilize both the price level and real GDP following a shock to aggregate demand.arrow_forward
- Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: Explain the effectiveness of the monetary policy, if people do not believe that the central bank will honour its promise to bring the economy back to the pre-pandemic level. In this case, is the sacrifice ratio expected to be larger or smaller?arrow_forwardConcerning the Great Depression; the stock market crash of 1929, collapse of the banking system, and collapse of the money supply all were factors that could be modeled as a leftward shift of SRAS a rightward shift of SRAS a leftward shift of AD a rightward shift of ADarrow_forwardIn the medium run, if government purchases are increased and nominal money supply is decreased, we can expect that a. the interest rate will increase while aggregate demand and prices may increase, decrease, or remain the same b. aggregate demand and prices will increase but interest rates will not change c. aggregate demand and interest rates will decrease but prices will increase d. aggregate demand, prices, and the interest rate will all decrease e. the AD-curve will shift to the right and the AS-curve will shift to the leftarrow_forward
- Draw the AD/AS graph for the situation being described Explain one monetary policy action to correct the economy back to the natural rate Explain one fiscal policy action to correct the economy back to the natural rate Draw how the policy will impact the AD/AS model from part 1. 4. There has been a huge run in the prices of commodities especially oil in the past years. This run in prices has occurred with more and more people losing their jobs. The unemployment rate stands at 12% with inflation matching it at 14%. The people are now feeling the Misery Index of 26%. How will the government help them?arrow_forwardAn increase in the money supply will cause which of the following to occur? OPTIONS: a rightward shift of the aggregate supply curve a leftward shift of the aggregate demand curve a leftward shift of the aggregate supply curve a rightward shift of the aggregate demand curvearrow_forwardWhich of the following increases Aggregate Demand? a. Decrease in Money Supply b. Increase in Interest Rates c. Increase in the Money Supply d. Stronger US Dollararrow_forward
- Using a New Classical macroeconomic framework, critically explain the effects of a change in the unobservable component of the money supply on the price level.arrow_forwardSuppose the Federal Reserve begins to increase the supply of money at an increasing rate. What impact would that have on GDP, unemployment, and inflation?arrow_forwardUsing the AD-AS model, draw a graph and explain the effect of the implementation of a restrictive monetary policy on the equilibrium price level and the equilibrium level of output.arrow_forward
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