Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Chapter 26, Problem 21P

Use Table 26.3 to answer the following questions.

Chapter 26, Problem 21P, Use Table 26.3 to answer the following questions. Sketch an aggregate <x-custom-btb-me data-me-id='2095' class='microExplainerHighlight'>supply and aggregate demand</x-custom-btb-me>

  1. Sketch an aggregate supply and aggregate demand diagram.
  2. What is the equilibrium output and price level?
  3. If aggregate demand shifts right, what is equilibrium output?
  4. If aggregate demand shifts left, what is equilibrium output?
  5. In this scenario, would you suggest using aggregate demand to alter the level of output or to control any inflationary increases in the price level?

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Are the determinants of aggregate demand the same things that apply to demand for an individual good?
Use the following graph to answer the following questions. Line Y Price level (P) 100 80 B Line Z Line X2 Line X1 Real GDP (3) If point A occurs chronologically before point B, then this graph could represent a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply. a decrease in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in long-run aggregate supply. an increase in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in short-run aggregate supply.
The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion. Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand.                                                                        Change required to increase AD Expected rate of return on investment.        (decrease/increase) Incomes in other countries                           (decrease/increase) Consumer expectations about future profitability.  (improve/worsen) Government spending                                  (increase/decrease)
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