EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 24, Problem 5RQ
To determine
The sticky and flexible price.
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Aggregate D&S assignment chap 12....
Assignment Chapter 12
1. Suppose that the aggregate demand and aggregate supply
schedules for a hypothetical economy are as shown below: LO5
Amount of
Amount of
Real GDP
Real GDP
Demanded,
Billions
Price Level
Supplied,
Billions
(Price Index)
$100
300
$450
200
250
400
300
200
300
400
150
200
500
100
100
a. Use these sets of data to graph the aggregate demand and
aggregate supply curves. What is the equilibrium price level and the
equilibrium level of real output in this hypothetical economy? Is the
equilibrium real output also necessarily the full-employment real
output?
b. If the price level in this economy is 150, will quantity demanded
equal, exceed, or fall short of quantity supplied? By what amount? If
the price level is 250, will quantity demanded equal, exceed, or fall
short of quantity supplied? By what amount?
c. Suppose that buyers desire to purchase $200 billion of extra real
output at each price level. Sketch in the new…
5. Refer to the data in the table that
accompanies problem 2. Suppose that
the present equilibrium price level and
level of real GDP are 100 and $225, and
that data set B represents the relevant
aggregate supply schedule for the
economy. LO12.6
a. What must be the current amount of
real output demanded at the 100 price
level?
b. If the amount of output demanded
declined by $25 at the 100 price level
shown in B, what would be the new
equilibrium real GDP? In business
суcle
economists call this change in real
terminology,
what
would
GDP?
Suppose that the table presented below shows an economy's relationship between real output and the inputs needed to produce that
output:
Input Quantity
Real GDP
150.0
$ 400
112.5
300
75.0
200
Instructions: Enter your responses answers rounded to 2 decimal places.
a. What is the level of productivity in this economy?
b. What is the per-unit cost of production if the price of each input unit is $2?
$
C. Assume that the input price increases from $2 to $3 with no accompanying change in productivity. What is the new per-unit cost of
production?
In what direction would the $1 increase in input price push the economy's aggregate supply curve?
(Click to select) v
What effect would this shift of aggregate supply have on the price level and the level of real output?
O The price level would decrease and real output would increase.
O Both the price level and real output would remain the same.
O The price level would decrease and real output would remain the same.
O The price level would increase…
Chapter 24 Solutions
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- Fill in the missing portion of the following table and answer the following questions: (Billions) (Negative figures are surpluses) Year 2007 2008 2009 2010 2011 Potential Nominal GDP O248 billion O262 billion O 413 billion O 348 billion 14,449 14,981 15,310 15,647 16.134 Actual Nominal GDP 14,478 14,719 14,419 14,964 15,518 Shortfall in Output -29 262 892 682 616 Tax Rate 25% 25% 25% 25% 25% What was the structural budget deficit in 2008? Actual Budget Deficit (Minus Automatic Stabilizors) 183 413 1,063 877 891 Cyclical Budget Deficit S 66 154 Structural Budget Deficit 190 707 Actual Budgot Deficit % of GDP 1.26% 5.86% 5.74%arrow_forwardConsider the data shown in the table. Assume that the economy produces only textbooks. What is the growth rate of real GDP between the two years using last year as the base year? |Textbooks Actual Price Sold Last year This year 5,000 $50 5,250 $55 10% 5% O 2.5% 15%arrow_forwardSuppose the economy is in long-run equilibrium. Then because of the COVID pandemic, people become worried about their future income and retain that worry for some time. How is the new long-run equilibrium different from the original one? O a. the price level is the same and GDP is lower. O b. both price and real GDP are higher. O c. the price level is lower and real GDP is the same. O d. both price and real GDP are lower.arrow_forward
- If national income increases by $75 million and consumption increases by $15 million, the marginal propensity to consume is O 0.20. O 0.75. O 0.15. O 5. Show Transcribed Text SO 1.70. 3 The National Restaurant Association states that the restaurant industry has an economic effect of more than $1.7 trillion annually in the United States, with every dollar spent in restaurants generating an estimated total of $2.05 in spending in the economy. This indicates that the spending multiplier for the restaurant industry is equal to 1.21. 4:25. Ⓒ 2.05. Ćarrow_forwardSuppose Canada's economy is in a long-run equilibrium with real GDP equal to potential output. Now suppose there is a decrease in world demand for Canada's goods. In the short run, O A. real GDP and the price level both fall; real GDP returns to its original level with a lower price level O B. real GDP rises and the price level falls; real GDP returns to its original level with a higher price level O C. real GDP and the price level both rise; real GDP is below its original level with a higher price level D. real GDP falls and the price level rises; real GDP is below its original level with a lower price level In the long run,arrow_forward6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output supplied by firms can deviate from the natural level of output if the actual price level deviates from the expected price level in the economy. A number of theories explain reasons why this might happen. For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 110. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will and firms that rely on catalogs will respond by the quantity of output they supply. If enough firms face high costs of adjusting prices, the…arrow_forward
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