Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 20.A, Problem 5SQ
To determine
The reason behind the upward sloping
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Why the slope of the aggregate supply curve differs in the short-run and in the long-run? Why the long- run aggregate supply curve is vertical and why the short-run supply curve is upward sloping? Explain in detail.
Aggregate demand and aggregate supply, based on a problem from “Principles of Economics” by N. Gregory Mankiw
a) List the components of country’s GDP in an open economy. For each component, provide an example of an event that would cause a shift of the aggregate demand curve to the right.b) What will be the effect of such events on the level of prices and the real outcome in the short run? Provide a graph.c) What will be the effect of such events on the level of prices and the real outcome in the longrun? Update your graph
Suppose that firms become very pessimistic about future business conditions and cut heavily on investment in capital equipment.
Show the long-run equilibrium of the economy. Explain what happens to Price level and Quantity of Output in the long run equilibrium. Explain in words why the aggregate quantity of output demanded changes between the short run and the long run. [No policy involvement]
Chapter 20 Solutions
Economics For Today
Ch. 20.7 - Prob. 1YTECh. 20.A - Prob. 1SQPCh. 20.A - Prob. 2SQPCh. 20.A - Prob. 3SQPCh. 20.A - Prob. 4SQPCh. 20.A - Prob. 5SQPCh. 20.A - Prob. 6SQPCh. 20.A - Prob. 1SQCh. 20.A - Prob. 2SQCh. 20.A - Prob. 3SQ
Ch. 20.A - Prob. 4SQCh. 20.A - Prob. 5SQCh. 20.A - Prob. 6SQCh. 20.A - Prob. 7SQCh. 20.A - Prob. 8SQCh. 20.A - Prob. 9SQCh. 20.A - Prob. 10SQCh. 20.A - Prob. 11SQCh. 20.A - Prob. 12SQCh. 20.A - Prob. 13SQCh. 20.A - Prob. 14SQCh. 20.A - Prob. 15SQCh. 20.A - Prob. 16SQCh. 20.A - Prob. 17SQCh. 20.A - Prob. 18SQCh. 20.A - Prob. 19SQCh. 20.A - Prob. 20SQCh. 20 - Prob. 1SQPCh. 20 - Prob. 2SQPCh. 20 - Prob. 3SQPCh. 20 - Prob. 4SQPCh. 20 - Prob. 5SQPCh. 20 - Prob. 6SQPCh. 20 - Prob. 7SQPCh. 20 - Prob. 8SQPCh. 20 - Prob. 9SQPCh. 20 - Prob. 10SQPCh. 20 - Prob. 11SQPCh. 20 - Prob. 1SQCh. 20 - Prob. 2SQCh. 20 - Prob. 3SQCh. 20 - Prob. 4SQCh. 20 - Prob. 5SQCh. 20 - Prob. 6SQCh. 20 - Prob. 7SQCh. 20 - Prob. 8SQCh. 20 - Prob. 9SQCh. 20 - Prob. 10SQCh. 20 - Prob. 11SQCh. 20 - Prob. 12SQCh. 20 - Prob. 13SQCh. 20 - Prob. 14SQCh. 20 - Prob. 15SQCh. 20 - Prob. 16SQCh. 20 - Prob. 17SQCh. 20 - Prob. 18SQCh. 20 - Prob. 19SQCh. 20 - Prob. 20SQ
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Similar questions
- Assuming a stable short-run supply curve, what will happen if there is a shift in aggregate demand? a) Profits and output increase in the long-run. b) Unemployment decreases in the long-run. c) Profits and output decrease in the short-run. d) Unemployment increases in the short-run. e) Unemployment and prices move in opposite directions in the short-run.arrow_forwardIf aggregate demand shifts left, then in the short run a. the price level and real GDP both rise. b. the price and real GDP both fall. c. the price level falls and real GDP rises. d. the price level rises and real GDP falls.arrow_forwardPart (e) of the following question: Assume that a country’s economy is in long-run equilibrium. (a) Using a correctly labeled graph of aggregate demand, short-run aggregate supply, and long-run aggregate supply, show the short-run equilibrium price level, labeled PL1, and output level, labeled Y1. (b) Assume that increased uncertainty has reduced business orders for equipment. What is the impact of the change in business orders on each of the following in the short run? (i) Aggregate demand. Explain. (ii) Employment (c) Based on the change in business orders, what will happen to the long-run economic growth rate? Explain. (d) Using a correctly labeled graph of the loanable funds market, show the effect of the change in business orders on the real interest rate in the country in the short run. (e) Given the effect on the real interest rate identified in part (d), what will happen to each of the following? (i) The supply of the country’s currency on the foreign…arrow_forward
- why the short run aggregate supply curve has a positive slope and the long run supply curve a vertical line.arrow_forwardUse the model of aggregate demand and short run aggregate supply to explain how each of the following would affect real gdp and the price level in the short run. A. Reduction in nominal wages B. Major improvement in technology Reduction in net exportarrow_forwardThe aggregate supply curve is upward sloping in the short-run because of the Profit effect which says the rate of output will increase as the price level increases. Profit effect which says higher input costs will cause an increase in the rate of output. Cost effect which says the rate of output will increase if production costs increase. Cost effect which says higher input costs will cause an increase in the rate of inputs. Inflation effect which says that everything costs more because U.S. debt is so large.arrow_forward
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