Pearson eText Economics -- Instant Access (Pearson+)
13th Edition
ISBN: 9780136879459
Author: Michael Parkin
Publisher: PEARSON+
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Chapter 27, Problem 15APA
To determine
Identify the impact of events on the Country U’s real GDP and the
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Students have asked these similar questions
The diagram below shows various points on three aggregate demand (AD) curves.
A decrease in the price level will produce a movement between which of the following two points on the diagram above?
From point X to point Y
From point W to point Y
From point W to point Z
From point Z to point Y
From point Y to point Z
In the long-run, aggregate supply is a horizontal line at the long-run price level
people can afford.
True
False
One reason for why the aggregate demand curve slopes down is the wealth effect,
which means that a higher price level leads to lower real wealth and, thereby,
reduces the level of consumption.
True
False
Determinants of aggregate supply
The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS1AS1 to AS2AS2, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion.
The following table lists several determinants of short-run aggregate supply.
Complete the table by selecting the changes in each scenario necessary to increase short-run aggregate supply.
Change Necessary to Increase AS
Technology
(DECLINES or IMPROVES)
Human capital
(IMPROVES or DECLINES)
Inflation expectations
(HIGHER or LOWER)
Chapter 27 Solutions
Pearson eText Economics -- Instant Access (Pearson+)
Ch. 27.1 - Prob. 1RQCh. 27.1 - Prob. 2RQCh. 27.1 - Prob. 3RQCh. 27.1 - Prob. 4RQCh. 27.2 - Prob. 1RQCh. 27.2 - Prob. 2RQCh. 27.2 - Prob. 3RQCh. 27.3 - Prob. 1RQCh. 27.3 - Prob. 2RQCh. 27.3 - Prob. 3RQ
Ch. 27.3 - Prob. 4RQCh. 27.4 - Prob. 1RQCh. 27.4 - Prob. 2RQCh. 27.4 - Prob. 3RQCh. 27 - Prob. 1SPACh. 27 - Prob. 2SPACh. 27 - Prob. 3SPACh. 27 - Prob. 4SPACh. 27 - Prob. 5SPACh. 27 - Prob. 6SPACh. 27 - Prob. 7SPACh. 27 - Prob. 8SPACh. 27 - Prob. 9SPACh. 27 - Prob. 10APACh. 27 - Prob. 11APACh. 27 - Prob. 12APACh. 27 - Prob. 13APACh. 27 - Prob. 14APACh. 27 - Prob. 15APACh. 27 - Prob. 16APACh. 27 - Prob. 17APACh. 27 - Prob. 18APACh. 27 - Prob. 19APACh. 27 - Prob. 20APACh. 27 - Prob. 21APACh. 27 - Prob. 22APACh. 27 - Prob. 23APACh. 27 - Prob. 24APACh. 27 - Prob. 25APACh. 27 - Prob. 26APA
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- Determinants of aggregate demand The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion.arrow_forwardThe data below represents the price level, the aggregate demand, and the aggregate supply data for an economy. Use the data points to plot an aggregate demand curve and aggregate supply curve for this economy. Each curve is labeled as AS (Aggregate Supply) or AD (Aggregate Demand) and each point is labeled as a, b, or c from the table headings. (Hint: Note that point a from the AD curve is already plotted with the correct coordinates. Plot the remaining points.) Provide your answer below: Price Level -100 200 180 160- 140- 120 AS: a ($140,100) AS: b ($300, 100) AS: c ($500,100) 100- -80 -60 40 20 0 -20 AD: c ($100,80) 100 Price Level Aggregate Supply (AS) Aggregate Demand (AD) 200 AD: b ($300,80) AD: a ($390,80) 300 400 600 500 Real GDP ($) a b 120 80 $320 $420 $390 $340 C 170 $540 $280arrow_forwardThe following graph plots aggregate demand (AD2027AD2027) and aggregate supply (AS) for the imaginary country of Cotopaxi in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will be given by the curve labeled ADAADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate demand in 2028 will be given by the curve labeled ADBADB, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 2027 and 2028, depending on whether the economy moves from the initial price level of 102 to the…arrow_forward
- The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 180. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 180, but the actual price level turns out to be 240. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 380 300 240 180 80 0 3 SRAS[180] 9 12 REAL GDP (Trillions of dollars) 15 18 0 SRAS[180] 0arrow_forwardIn the past two decades, the government of Qatar has made significant investments to increase the level of infrastructure and human capital in the country. Suppose the accompanying graph illustrates the aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS) curves for Qatar before these investments were made. Assume all three curves were impacted by these investments. Adjust the graph to show Qatar’s new long‑run macroeconomic equilibrium.arrow_forwardDeterminants of aggregate demand The following graph shows an increase in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, causing the quantity of output demanded to rise at all price levels. For example, at a price level of 140, output is now $400 billion, where previously it was $300 billion.arrow_forward
- The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 240 200 160 40 0 0 3 SRAS[120] 6 9 12 REAL GDP (Trillions of dollars) 15 18 SRAS[120] 0 (?) Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph:arrow_forwardMacroland is recognized as a high-income economy by the World Bank. The country of Macroland is now in a recession. Using a correctly labeled graph of the long run aggregate supply, short run aggregate supply, and aggregate demand curves and show each of the following: Current price level, labeled PL1 Current output, labelled Y1 Assume that Braveland, a major trading partner of Macroland, enters into a recession. Explain the effect on Macroland exports to Braveland On your graph in part (a) above, show the effect of the change identified in part (b) (i) above on real output in Macroland. How would this change in real output in Macroland affect unemployment in Macroland? Assume the recession in Braveland causes a decrease in the demand for Macroland dollars in the foreign exchange market. Braveland’s currency is the euro. Explain whether the euro will appreciate, depreciate, or remain…arrow_forwardMacroland is recognized as a high-income economy by the World Bank. The country of Macroland is now in a recession. Using a correctly labeled graph of the long run aggregate supply, short run aggregate supply, and aggregate demand curves and show each of the following: Current price level, labeled PL1 Current output, labelled Y1 Assume that Braveland, a major trading partner of Macroland, enters into a recession. Explain the effect on Macroland exports to Braveland On your graph in part (a) above, show the effect of the change identified in part (b) (i) above on real output in Macroland. How would this change in real output in Macroland affect unemployment in Macroland? Assume the recession in Braveland causes a decrease in the demand for Macroland dollars in the foreign exchange market. Braveland’s currency is the euro. Explain whether the euro will appreciate, depreciate, or remain…arrow_forward
- Macroland is recognized as a high-income economy by the World Bank. The country of Macroland is now in a recession. Using a correctly labeled graph of the long run aggregate supply, short run aggregate supply, and aggregate demand curves and show each of the following: Current price level, labeled PL1 Current output, labelled Y1 Assume that Braveland, a major trading partner of Macroland, enters into a recession. Explain the effect on Macroland exports to Braveland On your graph in part (a) above, show the effect of the change identified in part (b) (i) above on real output in Macroland. How would this change in real output in Macroland affect unemployment in Macroland? Assume the recession in Braveland causes a decrease in the demand for Macroland dollars in the foreign exchange market. Braveland’s currency is the euro. Explain whether the euro will appreciate, depreciate, or remain…arrow_forwardThe following graph represents the aggregate supply (AS) curve based on an expected price level of 120. The economy's potential GDP level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 80. Show the short-run effect of the unexpectedly low price level by dragging the curve or moving the point to the appropriate position. Note: To move the curve, select and drag any part of the curve except the point. To move the point, select and drag the point along the curve. If you want to move both, first move the curve, and then move the point. The curve and point will snap into position, so if you try to move one of them and it snaps back to its original position, just try again and drag it a little farther. PRICE LEVEL 240 200 160 8 120 PRICE LEVEL 80 40 0 240 200 0 Interpret the change you drew on the previous graph by…arrow_forwardWhich of the following would shift the U.S. aggregate demand curve to the left? Select all correct answers. A drought reduces agricultural production. The economy of China slows and buys even fewer U.S.-made goods, An improvement in technology allows production to be more efficient. There is a rise in unemployment, decreasing the aggregate income of households. The value of the dollar decreases relative to foreign currencies.arrow_forward
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