MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
8th Edition
ISBN: 9780134518312
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 30, Problem 8MCQ
To determine
To identify:
The option which correctly states the shift in the AE curve which happens with an increase in
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Determine whether the ad or as curve with shift with each scenarios below. Each situation is independent of each other.
1- a increase in the personal income tax rate. AD or AS
2-an increase in government spending
3-decrease in resource prices
4-decrease in subsidies for businesses
5-decrease in interest rates
The price level rises, and this changes the real value of consumers’ wealth. Does this cause a movement along the AD curve, or a shift to a new AD curve?
A. A movement along the AD curve
B. A shift to a new AD curve
C. None of the Above
Construct an Aggregate Supply and Aggregate Demand model where AS and AD are in equilibrium at potential GDP at a price level of 110 and Real GDP of $13.0 trillion dollars. Be sure to label all parts of the graph.
a. Graph the initial effects of a recession that causes AD to decrease and real GDP to fall $0.5 trillion.
b. Explain what will happen in the long run if nothing is done.
c. If the government wanted to intervene in the economy, explain the Fiscal Policy measures that can be used to bring real GDP back to potential.
Chapter 30 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
Ch. 30 - Prob. 1SPPACh. 30 - Prob. 2SPPACh. 30 - Prob. 3SPPACh. 30 - Prob. 4SPPACh. 30 - Prob. 5SPPACh. 30 - Prob. 6SPPACh. 30 - Prob. 7SPPACh. 30 - Prob. 8SPPACh. 30 - Prob. 9SPPACh. 30 - Prob. 1IAPA
Ch. 30 - Prob. 2IAPACh. 30 - Prob. 3IAPACh. 30 - Prob. 4IAPACh. 30 - Prob. 5IAPACh. 30 - Prob. 6IAPACh. 30 - Prob. 7IAPACh. 30 - Prob. 8IAPACh. 30 - Prob. 9IAPACh. 30 - Prob. 10IAPACh. 30 - Prob. 1MCQCh. 30 - Prob. 2MCQCh. 30 - Prob. 3MCQCh. 30 - Prob. 4MCQCh. 30 - Prob. 5MCQCh. 30 - Prob. 6MCQCh. 30 - Prob. 7MCQCh. 30 - Prob. 8MCQ
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Similar questions
- If taxes are increased, the AD curve Select one: a. shifts rightward and aggregate demand decreases. b. shifts leftward and aggregate demand decreases. c. does not shift but there is a movement down along the curve. d. is not affected because a change in taxes is a nominal change not real change.arrow_forwardWhich of the following would likely cause an upward parallel shift in the AE curve and a rightward shift in the AD curve? an increase in the MPC an increase in the price level a decrease in the price level a reduction in government purchases an increase in the business confidence of firms.arrow_forwardQuestion 3Explain fully why the AD curve has a negative slope. Use graphs to illustrate.arrow_forward
- QUESTION 21 Why the AD curve might shift? Tax hikes/cuts. Booms/recessions in countries that buy our exports. Changes in government spending. All of the above are correctarrow_forwardDraw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the state of the aggregate economy in the United States at the very beginning of 2020 before the start of the pandemic and the 2020 recession. Make sure that you explain your graph in your own words. You should draw your own AD/AS graph which you can then embed into your post. Your graph needs to be clearly labeled and explained in some detail. Make sure that your graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply curve (LRAS, Potential GDP) curve. You should clearly label both axes of the graph.arrow_forwardSuppose that in 2008, Sanaton’s government increases taxes. Show how this event will change equilibrium output and price level by shifting either the SRAS or AD curve, and then answer the questions below. Did equilibrium output increase or decrease?Increase/Decrease Did equilibrium price increase or decrease?Increase/Decreasearrow_forward
- Explain carefully: “A change in the price level shifts the aggregate expenditures curve but not the aggregate demand curve.”arrow_forwardThe determinants of aggregate demand explain shifts in the aggregate demand curve. How does a change in investment spending affect aggregate demand? Asaparrow_forwardThis problem has been solved! See the answer Explain the relationship between the aggregate expenditures model in graph (A) below and the aggregate demand–aggregate supply model in graph (B) below. In other words, explain how points 1, 2, and 3 are related to points 1’, 2’, and 3’.arrow_forward
- 5. Short-run shocks in the AD-AS model The following graph shows an economy that is initially in equilibrium. Then, a large decline in stock prices occurs, reducing the wealth of individuals. On the graph, show the economic impact of this event in the short-run aggregate demand and aggregate supply (AD–AS) model by shifting one or both curves. Show the movement of the AD and SRAS on a graph. This event is an example of a decrease in AD/increase in AD/ decrease in SRAS/ increase in SRAS. As a result, the price level declines/rises, and the equilibrium real GDP declines/rises.arrow_forwardWhich of the following both shift the aggregate demand curve to the right? Group of answer choices net exports rise for some reason other than a price change and the money supply rises. net exports fall for some reason other than a price change and the money supply rises. net exports rise for some reason other than a price change and the price level rises. net exports fall for some reason other than a price change and the price level rises.arrow_forwardConsumption spending was $150$150 billion, investment spending was $40$40 billion, government spending was $50$50 billion, spending on exports was $42$42billion, and spending on imports was $35$35 billion. The price level increases, resulting in a decline in investment spending by 30%30%. Consumption spending decreases by 10%10%.If other factors stay at the same level, determine aggregate demand after the price level increased. Enter your answer in the box below.arrow_forward
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