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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Question
Chapter 32.7, Problem 2QQ
To determine
Reason for upward supply curve.
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Students have asked these similar questions
1. If the president announced a plan to start a war on Iran, this would
a. shift the LRAS to the right
b. shift the Agg D curve to the right
c. shift the LRAS to the left
d. answers b or c might be true
2. The agg D curve might shift to the left if
a. interest rates went up
b. interest rates went down
c. the price level went up
d. the price level went down
policy one : increase government spending
policy two : reduce tax and increase money supply for the same amount (dollar for dollar)
in the LONG TERM
using the IS/LM diagram, which policy would result in a lower r real interest rate (higher investment)
3) Using IS-LM, AS-AD and labor market curves, explain a recession caused by a decrease in investment spendings.
please. full answer
Chapter 32 Solutions
Economics (Irwin Economics)
Ch. 32.7 - Prob. 1QQCh. 32.7 - Prob. 2QQCh. 32.7 - Prob. 3QQCh. 32.7 - Prob. 4QQCh. 32.A - Prob. 1ADQCh. 32.A - Prob. 2ADQCh. 32.A - Prob. 1ARQCh. 32.A - Prob. 2ARQCh. 32.A - Prob. 1APCh. 32.A - Prob. 2AP
Ch. 32 - Prob. 1DQCh. 32 - Prob. 2DQCh. 32 - Prob. 3DQCh. 32 - Prob. 4DQCh. 32 - Prob. 5DQCh. 32 - Prob. 6DQCh. 32 - Prob. 7DQCh. 32 - Prob. 8DQCh. 32 - Prob. 9DQCh. 32 - Prob. 1RQCh. 32 - Prob. 2RQCh. 32 - Prob. 3RQCh. 32 - Prob. 4RQCh. 32 - Prob. 5RQCh. 32 - Prob. 6RQCh. 32 - Prob. 7RQCh. 32 - Prob. 8RQCh. 32 - Prob. 9RQCh. 32 - Prob. 1PCh. 32 - Prob. 2PCh. 32 - Prob. 3PCh. 32 - Prob. 4PCh. 32 - Prob. 5P
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- 1. Use the AD-AS model attached to explain and illustrate the difference between demand side measures and supply side measures and give an example of each. Also mention which markets are embedded within each curve. 2. Use the AD-AS model to Analyze and illustrate the short run impact of an increase in energy prices on GDP, inflation and employment. Which type of inflation is this?arrow_forwardA) Identify - and justify with macroeconomic arguments the long-term adjustments (i.e., the possible displacements of the 3 curves identified on the graph) that can be expected, all things being equal. b) Identify - and justify with macroeconomic arguments what are the implications for: i. the inflation rate, ii. the real growth rate, iii.the unemployment rate, and iv. the output gap (i.e. the difference between realized GDP and full capacity GDP)arrow_forwardi neeed it in word form.. not handwrittten Explain, with the aid of three separate IS-LM-FE diagrams, how a decrease in government purchases will affect real output, real interest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain the intuition of your answer with reference to the AD-AS framework.arrow_forward
- Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G, and desired investment isId = 100 - 500r. Real money demand is Md/P = Y - 2000i. Other variables are πe = 0.05, G = 200, = 1000, and M = 2100.a. Find the equilibrium values of the real interest rate, consumption, investment, and the price level. b. Suppose the money supply increases to 2800. Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (Assume that the expected inflation rate is unchangedarrow_forwardConsider the economy of XYZ, has the following indicators in the table below:Ct = 0.7Yt̅Gt = 0.2Yt̅EXt = 0.20Yt̅IMt = 0.25Yt̅It = 0.30 − 2.0(Rt − 1.2)Yt̅A. Derive the IS equation. Explain why the IS curve has downward slope.B. Estimate the short-run output when real interest rate equals to 2 percent.C. Calculate the value of multiplier and interpret the result.D. Suppose the government increases the expenditure such as:Gt = 0.3Yt̅Show the impact on IS curve in graphically, and calculate the government expenditure multiplier.How much short-run output change? Explain the reason.arrow_forwardDescribe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag. Give the economic intuition of the results on consumption, investment, produc- tivity, wages and price levels. [Note, I am looking for the correlation between each of these items and income. Give leads and lags only when the most important correlation is not contemporaneous. You may trust the author of the book on this one.]arrow_forward
- Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…arrow_forwardAssume that prices and wages adjust rapidly so that the markets for labor, goods and assets are always in equilibrium. What is the effect of a temporary increase in government purchases (G) on; real wage (w), full employment level of employment (LF) real output (YF), the real interest rate (r), current price level (P) inflation (Π) amount of investment (I)? Please explain with details how and why the change in a temporary increase in government purchases (G) affects each market (labor, goods and assets markets) by using graphs.arrow_forwardAssume the following IS-LM model: expenditure sector: money sector: AD = C + I + G + NX I = 300 - 20i M = 700 C = 100 + (4/5)YD G = 120 P = 2 YD = Y - TA NX = -20 md = (1/3)Y + 200 - 10i TA = (1/4)Y a. Derive the equilibrium values of consumption (C) and money demand (md). b. How much investment (I) will be crowded out if the government increases its purchases by DG = 160 and nominal money supply (M) remains unchanged? c. By how much will the equilibrium level of income (Y) and the interest rate (i) change, if the Fed responds to this increase in government purchases by increasing nominal money supply to M' = 1,100?arrow_forward
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