PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.7CC
To determine
Impact of decreasing consumer spending on output in short run and long run.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In Figure 2 above, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand-pull inflation, cost-push inflation and recession?
Suppose an economy is hit by natural disaster and its natural resources decreases.
Show graphically using AD-AS model how the price level and output are affected in the short-run.
Can the government use monetary policy to offset the effects on both price level and output simultaneously, explain?
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?
Chapter 15 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
Ch. 15.A - Prob. 15A.1CCCh. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Why, in the absence of public beliefs that the...Ch. 15 - Prob. 9RQ
Ch. 15 - Prob. 10RQCh. 15 - Prob. 1PCh. 15 - For the economy in Problem 1, suppose that...Ch. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - For each of the following, use an AD-AS diagram to...Ch. 15 - Prob. 6PCh. 15 - Suppose that a permanent increase in oil prices...Ch. 15 - An economy is initially in recession. Using the...Ch. 15 - Prob. 9PCh. 15 - Prob. 10PCh. 15 - Prob. 11PCh. 15 - Prob. 15.1CCCh. 15 - Prob. 15.2CCCh. 15 - Prob. 15.3CCCh. 15 - Prob. 15.4CCCh. 15 - Prob. 15.5CCCh. 15 - Prob. 15.6CCCh. 15 - Prob. 15.7CCCh. 15 - Prob. 15.8CCCh. 15 - Prob. 15.9CCCh. 15 - Prob. 15.10CC
Knowledge Booster
Similar questions
- According to Friedman, in which of the following situations is the economy in long-run equilibrium? a. The expected economic growth rate is 3 percent and the actual inflation rate is 3 percent. b. The average inflation rate over the past five years is 2 percent and the expected inflation rate is 2 percent. c. The expected inflation rate is 3 percent and the actual inflation rate is 3 percent. d. The expected economic growth rate is 2 percent and the expected inflation rate is 2 percent.arrow_forwardEcon 2 2022- 2b: How would you expect a decrease in Aggregate Demand to affect both inflation and real GDP? Under what conditions would you expect a decrease in AD to have a bigger effect on inflation than real GDP?arrow_forwardConsider a standard AD-AS model.An increase in the inflation target is associated with a short-run decrease in unemployment but not along-run decrease in unemployment.Answer true, false, or uncertain. Please briefly explain your answer.arrow_forward
- In its announcement, the RBA Governor refers to “the importance of returning inflation to target.” As part of your Policy Brief, explain what is meant by the inflation target and how does an inflation target contribute to good economic management? Based on the news updates that we discussed in our lectures and tutorials throughout this course, what are some factors that are currently contributing to inflationary pressures in Australia and globally, and which part of the AD-AS model are these factors affecting? (2-3 sentences)arrow_forwardFor each of the following events, draw an AS-AD diagram and explain the short-run effects on output and the price level. Assume that policymakers take no (other) actions. 1. The government increases cooperate tax. 2. Households decide to save a large share of their income. 3. Price of oil increases. At the same time, the government increases spending on military. 4. Price of oil increases. At the same time, the average wage increases in the U.S.arrow_forwardUsing the AD/AS model, show how fear of a recession is expected to affect an economy experiencing too much inflationarrow_forward
- The economy of Pakistan has faced both a supply demand shock in the first quarter of 2020. Using the AS/AD model explain how you expect the economy to behave in the short and long run. How does the decision to reduce the policy rate impact the economy. Explain using the ISLM model focusing on impacts on the goods and services market and the financial market.arrow_forwardUsing graphical illustration of AS-AD framework, show the effects of following events on real output and price level in the economy The government raises taxes by $100 billion. Government announces an interest rate cut to encourage business investment.arrow_forwardExplain in details how high inflation can lead to a recession in several ways.arrow_forward
- (Please attach a graph showing your work for each question) Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. Show the adjustment process of the economy from the short-run to the long-run. What is the effect on unemployment in short-run and long-run? Can policymakers do something to accommodate this shock? Would the outcome be different in this case?arrow_forward(Please attach a graph showing your work for each question) Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. Show the adjustment process of the economy from the short-run to the long-run. What is the effect on unemployment in short-run and long-run? Can policymakers do something to accommodate this shock? Would the outcome be different in this case? Suppose that the coronavirus pandemic (COVID 19) in 2020 has resulted in a leftward shift of the aggregate demand curve (it has also shifted the short-run aggregate supply to the left, butlet’s ignore this effect here for simplification). Use the aggregate-demand/aggregate-supply model to show the effects on output and the price level/inflation in both the short run and long run (assume that the short-run aggregate supply curve is upward…arrow_forwardThe COVID-19 pandemic continues to present new challenges to the Australian economy. The Treasury has announced that they continue to support the economy by adding $41 billion in direct economic support, bringing total support since the beginning of the pandemic to $291 billion as of May 2021. Using a AD-AS graph, illustrate how this support would impact on economic growth and inflation in the short and long termarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning