Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
8th Edition
ISBN: 9780134641843
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 29, Problem 11SPPA
To determine
To explain:
The possible causes for recession in 2008-2009 and the role of decrease in
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After defining what we mean with the term “business cycle”, briefly explain the effects of thefollowing cases regarding output, price levels, employment and the overall situation of the economy(recession, expansion etc.). Use graphs to explain yourself in a clear and effective way.i)Suppose the consumers are more pessimistic about the future and reduce their consumption.ii) Suppose the government banned a specific type of technology that firms use to increaseproductivity.
Aggregate demand and aggregate supply, based on a problem from “Principles of Economics” by N. Gregory Mankiw
a) List the components of country’s GDP in an open economy. For each component, provide an example of an event that would cause a shift of the aggregate demand curve to the right.b) What will be the effect of such events on the level of prices and the real outcome in the short run? Provide a graph.c) What will be the effect of such events on the level of prices and the real outcome in the longrun? Update your graph
List three factors that can change economy’s potential output. What is the impact of shifts of the aggregate demand curve on potential output? Illustrate with a diagram.
Chapter 29 Solutions
Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
Ch. 29 - Prob. 1SPPACh. 29 - Prob. 2SPPACh. 29 - Prob. 3SPPACh. 29 - Prob. 4SPPACh. 29 - Prob. 5SPPACh. 29 - Prob. 6SPPACh. 29 - Prob. 7SPPACh. 29 - Prob. 8SPPACh. 29 - Prob. 9SPPACh. 29 - Prob. 10SPPA
Ch. 29 - Prob. 11SPPACh. 29 - Prob. 1IAPACh. 29 - Prob. 2IAPACh. 29 - Prob. 3IAPACh. 29 - Prob. 4IAPACh. 29 - Prob. 5IAPACh. 29 - Prob. 6IAPACh. 29 - Prob. 7IAPACh. 29 - Prob. 8IAPACh. 29 - Prob. 9IAPACh. 29 - Prob. 10IAPACh. 29 - Prob. 1MCQCh. 29 - Prob. 2MCQCh. 29 - Prob. 3MCQCh. 29 - Prob. 4MCQCh. 29 - Prob. 5MCQCh. 29 - Prob. 6MCQCh. 29 - Prob. 7MCQ
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- The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table 24.3 shows. Plot the AD/AS diagram. Identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect concern about inflation in this economy to be relatively high or low? Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. How will the shift in AD affect the original output, price level, and employment?arrow_forwardExplain what types of policies the federal government may have implemented to restore aggregate demand and the potential obstacles policymakers may have encountered.arrow_forwardassume that the economy is operating in a recessionary. explain all the steps which the bank of canada should take in order to fix this problem. 2 graph is needed along with the explanation.arrow_forward
- PART 2 When a pandemic strikes the Australian economy, many businesses are temporarily closed, aggregate demand (AD) falls because people are staying at home rather than spending at those businesses. Because those businesses cannot produce goods and services, both of the short-run GDP and the economy’s potential GDP, as reflected in the SRAS and LRAS curve, fall as well. Use the following graph to answer these questions. a)Calculate the actual real GDP growth and inflation rate in 2020. b)In the long run, will inflation be expected to rise or fall and why?arrow_forwardExplain how a recession can affect the aggregate demand of an economy. Your explanation should include a relevant example of such a recession and its effects on economies in general and emerging economies in specific (like UAE). (1000 wordsarrow_forwardAnalyzing Business Cycles: (Please attach a graph showing your work for each question) 1. Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock. A. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. B. Show the adjustment process of the economy from the short-run to the long-run. C. What is the effect on unemployment in short-run and long-run? D. Can policymakers do something to accommodate this shock? Would the outcome be different in this case?arrow_forward
- Question: The attached picture shows the aggregate demand/aggregate supply situation in the U.S. What is the value of actual GDP? What is the value of the GDP deflator? Assume that people and businesses become pessimistic about the future of the economy; how will this affect the graph above in the short run? (i.e., which curve(s) will shift, and in which direction?) After the short-run event in part b, what will happen to actual GDP? What will happen to the price level? After the short-run event in part b, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion). What long-run adjustments will be made in this economy as a result of the short-run changes in part c? How will the curve(s) shift in response to these long-run adjustments? After the long-run adjustments in part e, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion).arrow_forward13) Detail the workings of the real business cycle model.arrow_forwardreal business cycle theory suggest that _______ not important in explaining short-term fluctuations around actual output a. aggregate supply is b. potential output is c. real variables are d. aggregate demand isarrow_forward
- Chapter 14&15 Aggregate Demand and Aggregate Supply Identify factors that would cause consumption spending to increase. What effect would that have on aggregate demand? note highly requesting donot copy and paste from CHEGG.COM OR COURSEHERO. OR INTERENT THIS QUESTIONS BEEN ANSWERS ALL OVER PLACE I HAVE ANWERS FROM CHEGG TO WANT SOMETHING NEWarrow_forwardpart C D 3 . An economy experiences an adverse supply shock. a) Draw an AD-AS diagram to illustrate the effect of the shock. Be sure to include the LRAS line. b) What happens to output in the short run? What form of output gap (positive or negative) is formed? What happens to the aggregate price level in the short run? c) How will the long run equilibrium be restored? (Assume there is no fiscal and no monetary policy to help the process.) Explain and add this to your diagram. d) Does the process create inflation or deflation?arrow_forward2. An introduction to the AD-AS model The aggregate demand and aggregate supply model is a useful simplification of the macroeconomy used to explain short-run fluctuations in economic activity around its long-run trend. The vertical axis of a diagram of the aggregate demand and aggregate supply curves measures which of the following? An economy’s price level The amount of a particular representative good produced in the economy The price of a particular representative good produced in the economy Which of the following are reasons that the short-run aggregate supply curve slopes upward? Check all that apply. As the price level rises, firms expand their production because they can sell their output for more money. As the price level rises, firms find it more profitable to hire workers at any given wage. As the price level rises, firms decrease their investment because it is more expensive to purchase capital.arrow_forward
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