Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
Textbook Question
Chapter 24, Problem 61P

Table 24.4 describes Santher’s economy.

1. Plot the AD/AS curves and identify the equilibrium.
2. Would you expect unemployment in this economy to be relatively high or low?
3. Would you expect prices to be a relatively large or small concern for this economy?
4. Imagine that input prices fall and so AS shifts to the right by 150 units. Identify the new equilibrium.
5. How will the shift in AS affect the original output, price level, and employment?

Students have asked these similar questions
Suppose firms are optimistic about the outlook of the economy and they decide to increase investment. Also suppose that, simultaneously, there is a reduction in business taxes. Use the AD-AS graph to show what happens to the price level and output as a result.
The table below shows information on aggregate supply, aggregate demand and the price level for the imaginary country of Xurbia. Price Level AD AS 110 700 600 120 690 640 130 680 680 140 670 720 150 660 740 160 650 760 170 640 770  Plot the AD/AS diagram from the data shown (Don't have to show graph but do draw it to help you answer the questions). a.  Identify the equilibrium. b.  Imagine that as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium. c.  How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?
Use the AD-AS model in the figure below to answer the following questions. Price level LRAS AS * AD, AD₂ AD₁ Real GDP Suppose this economy is operating at point B, if there is an increase in the price of inputs, then in the short and in the long run. . . . run a) real GDP falls and the price level rises; real GDP is below its original level with a higher price level b) real GDP rises and the price level falls; real GDP and the price level return to their original levels c) real GDP and the price level both rise; real GDP is above its original level with a higher price level d) real GDP falls and the price level rises; real GDP is at its original level as a result of the factor price adjustment process e) real GDP and the price level both rise; real GDP returns to its original level with a higher price level
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