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 8SCQ
Suppose Mexico, one of our largest trading partners and purchaser of a large quantity of our exports, goes into a recession. Use the AD/AS model to determine the likely impact on our equilibrium
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Suppose Mexico, one of our largest trading partners and purchaser of a large quantity of our exports, goes into a recession. Use the AD/AS model to determine the likely impact on our equilibrium GDP and price level.
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?
Where does GDP fit into an AD/AS model?
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
- Derive the AD curve using the IS-LM model.arrow_forwardUse the AD-AS model to explain the impact of a general increase in productivity on the general price level and the level of real production and income in the economyarrow_forwardName some factors that could cause the SRAS curve to shift, and say whether they would shift SRAS to the right or to the left.arrow_forward
- Using the AD/AS model, what would be an explanation for observing an increased price level and a decreased real GDP? wages have increased. the money supply has decreased. productivity has increased. the money supply has increased.arrow_forwardWhich of the following would shift aggregate demand to the right? Choose all that apply. Group of answer choices Increasing imports. Increasing exports. Increasing taxes. Increasing consumer confidence.arrow_forwardDuring 2000, there was a sharp reduction in stock prices and a sharp increase in the world price of crude oil. How will aggregate demand and aggregate supply in the United States be influenced by these two factors? Using the AD-AS model, explain the expected impact on output.arrow_forward
- Q33. Draw a basic AD and SRAS graph (with LRAS constant) that shows the economy in the long-run equilibrium. Suppose that the war between Ukraine and Russia sharply increased the price of petroleum, causing the unit cost per output in the economy to increase. ***If you have any trouble to draw a graph, you can answer the question without a graph. If then, your answer should include all the necessary steps, not just the final outcome. a. Using the AD-AS model, briefly analyze the short-run effects of the war on equilibrium real GDP and the price level, either with a AD-AS diagram or without a diagram. b. How does the economy adjust back to long-run equilibrium? Briefly explain (either with a AD-AS diagram or without a diagram).arrow_forwardwhat is meant by a recessionary gap and an inflationary gap in the AD/AS model.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_forward
- An increase in the price of oil is an example of a negative supply shock. Draw and use the AD-AS model graph to explain the effect of a negative supply shock on the price levels and output levels in the economy.arrow_forwardThe government announces a cut in the income tax rate. Use the AD/AS model to analyse the short-run effects of this policy on GDP and the price level in the economy.arrow_forwardHow does each of the following infrastructure items affect aggregate supply? courts and prisons.arrow_forward
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