Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 24, Problem 50CTQ
If Congress cuts taxes at the same time that businesses become more pessimistic about the economy, what is the combined effect on output, the price level, and employment using the AD/AS diagram?
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If new government regulations require firms to use a cleaner technology that is also less efficient than what they previously used, what would the effect be on output, the price level, and employment using the AD/ AS diagram?
The graph below shows the AD-AS diagram for the US. How big is the inflationary gap?
Does the AD curve shift?
Chapter 24 Solutions
Principles of Economics 2e
Ch. 24 - Describe the mechanism by which supply creates its...Ch. 24 - Describe the mechanism by which demand creates its...Ch. 24 - The short run aggregate supply curve was...Ch. 24 - In the AD/AS model, what prevents the economy from...Ch. 24 - Suppose the U.S. Congress passes significant...Ch. 24 - Suppose concerns about the size of the federal...Ch. 24 - How would a dramatic increase in the value of the...Ch. 24 - Suppose Mexico, one of our largest trading...Ch. 24 - A policymaker claims that tax cuts led the economy...Ch. 24 - Many financial analysts and economists eagerly...
Ch. 24 - What impact would a decrease in the size of the...Ch. 24 - Suppose, after five years of sluggish growth, the...Ch. 24 - Suppose the Federal Reserve begins to Increase the...Ch. 24 - If the economy is operating in the neoclassical...Ch. 24 - If the economy is operating In the Keynesian zone...Ch. 24 - What is says law?Ch. 24 - What is Keynes; law?Ch. 24 - Do neoclassical economists believe in Keynes law...Ch. 24 - Does Says law apply more accurately in the long...Ch. 24 - What is on the horizontal axis of the AD/AS...Ch. 24 - What is the economic reason why the SRAS curve...Ch. 24 - What are the components of the aggregate demand...Ch. 24 - What are the economic reasons why the AD curve...Ch. 24 - Briefly explain the reason for the near-horizontal...Ch. 24 - Briefly explain the reason for the near-vertical...Ch. 24 - What is potential GDP?Ch. 24 - Name some factors that could cause the SRAS curve...Ch. 24 - Will the shift of SRAS to the right tend to make...Ch. 24 - What is stagflation?Ch. 24 - Name some factors that could cause AD to shift,...Ch. 24 - Would a shift of AD to the right tend to make the...Ch. 24 - How is long-term growth illustrated in an AD/AS...Ch. 24 - How is recession illustrated in an AD/AS model?Ch. 24 - How is cyclical unemployment illustrated in an...Ch. 24 - How is the natural rate of unemployment...Ch. 24 - How is pressure for inflationary price increases...Ch. 24 - What are some of the ways in which exports and...Ch. 24 - What is the Keynesian zone of the SRAS curve? How...Ch. 24 - What is the neoclassical zone of the SRAS curve?...Ch. 24 - What is the intermediate zone of the SRAS curve?...Ch. 24 - Why would an economist choose either the...Ch. 24 - On a microeconomic demand curve, a decrease in...Ch. 24 - Economists expect that as the labor market...Ch. 24 - If new government regulations require firms to use...Ch. 24 - During spring 2016 the Midwestern United States,...Ch. 24 - Hydraulic fracturing (tracking) has the potential...Ch. 24 - Some politicians have suggested tying the minimum...Ch. 24 - If households decide to save a larger portion of...Ch. 24 - If firms become more optimistic about the future...Ch. 24 - If Congress cuts taxes at the same time that...Ch. 24 - Suppose the level of structural unemployment...Ch. 24 - If foreign wealth-holders decide that the United...Ch. 24 - The AD/AS model is static. It shows a snapshot of...Ch. 24 - Explain why the short-run aggregate supply curve...Ch. 24 - Explain why the short-run aggregate supply curve...Ch. 24 - Why might it be important for policymakers to know...Ch. 24 - In your view, is the economy currently operating...Ch. 24 - Are Says law and Keynes law necessarily mutually...Ch. 24 - Review the problem in the Work It Out titled...Ch. 24 - The imaginary country of Harris Island has the...Ch. 24 - Table 24.4 describes Santhers economy. Plot the...
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Similar questions
- What is Aggregate Demand (AD)? Investigate three (3) causes that can shift the AD curve to the right.arrow_forwardRecent economic reports forecast an increase in the interest rate, which likely increases households' desire to save more and decreases business willingness to invest. Use the AD/AD model to show the effects of an increase in the interest rate on the equilibrium Real GDP and Price index?arrow_forwardGraphically derive and explain the AD curve.arrow_forward
- Explain by using the AD- AS diagram how in absence of any government intervention the economy may correct itself in the long run. ALso if suppose the government decides to intervene to steer the economy in the right direction. What kinds of policies would the government possibly take? Please show the impact of such policies on the economy using the AD-AS diagram.arrow_forwardPolicymakers who can influence AD cannot offset the adverse effects of a recession due to a fall in AS’. Do you agree with this statement? Explain the answer in words and using an AD-AS diagramarrow_forwardUse the AD - AS model in the figure below to answer the following questions. Suppose the economy is currently experiencing an inflationary gap, without any government policy intervention, the economy would move from ◻ a) C to D b) B to A c) C to B d) A to E e) E to Aarrow_forward
- Why the AD curve always negative?arrow_forwardHayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?arrow_forwardAssuming a fall in price of oil, use the AD-AS framework to explain impact on prices, employment and income.arrow_forward
- Will the shift of SRAS to the right tend to make the equilibrium quantity and price level higher or lower? What about a shift of SRAS to the left?arrow_forward"Tax cuts are more effective in generating the economy when the economy is in recession compared to at full employment." True or False? Show and explain your answer based on the AD-AS model.arrow_forward
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