Economics (Irwin Economics)
Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 32, Problem 4RQ
To determine

Aggregate supply curve.

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Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?
42. Suppose that there is a temporary fall in aggregate supply due to a drought. Whathappens in the long-run?(A) Higher prices cause permanent tensions, leading long-run aggregate supply to shiftleft, resulting in a lower natural rate of output.(B) Over time, as the drought conditions fade, aggregate supply rises and returns tothe original natural rate of output.(C) Aggregate demand shifts right, so that prices are higher but long-run output isunchanged.(D) If the person you’re dating enjoys Taylor Swift, dump them immediately
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..
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