EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9781305465626
Author: Blinder
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 27, Problem 4TY
To determine
Illustrating the AD-AS diagram and multiplier effect.
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What are three factors that help explain the slope of the aggregate demand curve? What is the most important factor? Why?
If the economy’s labor force is increasing and also becoming more productive, what will happen to the aggregate supply curve?
Give examples of the factors that shift the Aggregate Demand Curve.
Chapter 27 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- Use the dynamic model of aggregate demand and supply to illustrate a situation where the economy is growing but experiencing inflation in the long run.arrow_forwardThe graphs illustrate an initial equilibrium for the economy. Suppose that the Federal Reserve raises interest rates. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Aggregate price level Short-run graph GDP In the short run, the price level LRAS Real GDP SRAS Short-run equilibrium AD and Aggregate price level Long-run graph LRAS Real GDP In the long run, the price level GDP SRAS Long-run equilibrium AD andarrow_forwardare my answers correct?arrow_forward
- prepare a list of events that would shift the aggregate supply curve leftward or rightward.arrow_forwardWhich of the following help to explain why the aggregate demand curve slopes downward? a. When the domestic price level rises, our goods and services become more expensive to foreigners. b. When government spending rises, the price falls. c. There is an inverse relationship between consumer expectations and personal taxes. d. When the price level rises, the real value of financial assets (like stocks, bonds, and savings account balances) declines. Label each of the following descriptions as being either an immediate-short-run aggregate supply curve, a short-run aggregate supply curve, or a long-run aggregagte supply curve. a. A vertical line b. The price level is fixed c. Output prices are flexible, but input prices are fixed d. A horizontal line e. An upsloping curve f. Output is fixed What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case, use a diagram to show the expected effects on the equilibrium price level…arrow_forwardIn your own words, explain why aggregate demand is inversely related to the price level. Why does the explanation for the inverse relationship between price and quantity demanded for the aggregate demand curve differ from that of a demand curve for a specific good?arrow_forward
- Give examples of the factors that shifts the Aggregate Supply Curve.arrow_forwardI can't find anything to back up that a decrease in aggregate demand causes cost push inflation. My textbook does mention the increase in aggregate supply. I thought that a decrease in price generally meant deflation? And doesn't the decrease (left shift) in aggregate demand result in lower prices?arrow_forwardb) Now suppose that a stock market crash causes aggregate demand to fall. Use your diagram to show what happens to output and the price level in the short-run . What happens to the unemployment rate? C) Use the sticky-warge theory of aggregate supply to explain what will happen to output and the price level in the long run(assuming no change in policy).What role does the expected price level play in this adjustment? Be sure to illustrate your analysis in a graph.arrow_forward
- Need help with this, Thanks!arrow_forwardHow does the economy return to equilibrium in response to changes in aggregate demand (AD) and aggregate supply (AS) in both the short run and long run.arrow_forwardThe following events shift either aggregate demand, aggregate supply, both or neither. Using a diagram, illustrate the effect of the events on the economy. In particular, explain the effect of each event on price level, real GDP and equilibrium in the economy. A) A recent business survey reported that business confidence has declined. B) Government cuts the rate of personal income tax after a pandemic caused an economic slowdown. C) A recent flooding in a small rural region destroyed the potato crop. D) A booming economy in a neighbouring country has drawn many working age people (and their families) to emigrate there in search of jobs and better life.arrow_forward
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