EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
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Chapter 33, Problem 7SPPA
To determine
The
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Using aggregate demand and aggregate supply, graph the effects on the price level and GDP of each of the following. Draw a large graph and label all axes, initial and final equilibrium points, direction of shift if any, all curves and lines, equilibrium values on the x- and y-axes. State the conclusion in words.
a. A cut in income taxes
b. An increase in military spending
c. A drop in export demand by foreign purchasers
d. An increase in imports
e. A decline in business investment spending
Homework: Chapter 09
PRICE LEVEL
140
135
130
125
120
115
110
105
100
0
Changes in a Self-Regulating Economy
1
AD2
SRAS
AD₁
LRAS
6
2
3
4
5
REAL GDP (Trillions of dollars)
8
Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD; to AD₂. As a classical economist
from Langoria, you explain that the shift in aggregate demand creates
. You also explain that
will be affected in the short run.
You note that such a gap leads to an unemployment rate that is
to ▼ As wages change, the
explain that in the long run,
the natural unemployment rate. This means that wages are certain
until Real GDP equals Natural Real GDP. Finally, you
curve shifts to the
will be affected.
MacBook Pro
X
A-Z
A+
Which of the following leads to a rightward shift in the aggregate demand?
a.
General price level fall
b.
Rise in government spending
c.
General price level rise
d.
Fall in government spending
Chapter 33 Solutions
EBK FOUNDATIONS OF ECONOMICS
Ch. 33 - Prob. 1SPPACh. 33 - Prob. 2SPPACh. 33 - Prob. 3SPPACh. 33 - Prob. 4SPPACh. 33 - Prob. 5SPPACh. 33 - Prob. 6SPPACh. 33 - Prob. 7SPPACh. 33 - Prob. 8SPPACh. 33 - Prob. 9SPPACh. 33 - Prob. 10SPPA
Ch. 33 - Prob. 11SPPACh. 33 - Prob. 1IAPACh. 33 - Prob. 2IAPACh. 33 - Prob. 3IAPACh. 33 - Prob. 4IAPACh. 33 - Prob. 5IAPACh. 33 - Prob. 6IAPACh. 33 - Prob. 7IAPACh. 33 - Prob. 8IAPACh. 33 - Prob. 9IAPACh. 33 - Prob. 10IAPACh. 33 - Prob. 11IAPACh. 33 - Prob. 12IAPACh. 33 - Prob. 1MCQCh. 33 - Prob. 2MCQCh. 33 - Prob. 3MCQCh. 33 - Prob. 4MCQCh. 33 - Prob. 5MCQCh. 33 - Prob. 6MCQCh. 33 - Prob. 7MCQ
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- Which one of the following variables is not held constant along a given aggregate demand curve? Select one: A. fiscal policy B. monetary policy C. expectations about inflation D. the price level O E. the exchange ratearrow_forwardParagraph Styles 3. QUESTION 1 For each of the following statements, show graphically and explain the expected effets of the equilibrium price and output for aggregate demand and aggregate supply, other things remaining constant. a. An appreciation in currency; b. An increase in price of non-labor inputs. c. A decrease in real wage rates. Page 2 of 3arrow_forwardWorksheet 5: Aggregate Supply and Aggregate Demand Name: Complete the questions below. Be sure to show your work. Upload this worksheet to Moodle. Consider the following Aggregate Supply and Aggregate Demand curves. 1. P Draw 10 8 6 4 2 69% 20 40 G93 AS/AD LRAS 60 80 SRAS AD 100 120 GDP 3. Does this graph represent a Recessionary Gap, an Inflationary Gap, or an economy that is operating at its potential output? Explain. the graph. Pregate Demand?arrow_forward
- QUESTION 48 Figure 3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." AS 2 B AS₁ KA A AD Y₂ Y₁ Y Refer to Figure 3. An increase in the price of oil could explain P₂ P₁ Inf Rate PC 1 PC2 a. neither the shift of the aggregate-supply curve from AS₁ to AS2 nor the shift of the Phillips curve from PC1 to PC2. b. both the shift of the aggregate-supply curve from AS₁ to AS2 and the shift of the Phillips curve from PC₁ to PC2. c. the shift of the aggregate-supply curve from AS1 to AS2, but it could not explain the shift of the Phillips curve from PC1 to PC₂. Od. the shift of the Phillips curve from PC₁ to PC2, but it could not explain the shift of the aggregate-supply curve from AS₁ to AS2.arrow_forwardNonearrow_forwardVII. Assume that the economy starts at the natural level of output. Now suppose there is a decline in business confidence, so that investment demand falls for any interest rate. a. In an AD-AS diagram, show what happens to output and the price level in the short run and the medium run. b. What happens to the unemployment rate in the short run and in the medium run?arrow_forward
- The economy starts out on the curves AD, and SAS- Price level (GDP deflator, 2009 = 100) Suppose that people expect deflation (a falling price level), but aggregate demand remains at AD 240 LAS Show what happens to the short-run and long-run aggregate supply curve. Label the new curve. 200- SASO Draw a point at the new macroeconomic equilibrium. 160 When it becomes obvious to everyone that the deflation is not going to occur, 120 120 O A. long-run aggregate supply increases O B. the money wage rate falls further OC. aggregate demand decreases OD. the money wage rate rises and the short-run aggregate supply curve returns to its original position 80 AD 40- 10 10 11 12 13 14 Real GDP (trillions of 2009 dollars) 15 >>> Draw only the objects specified in the question.arrow_forward1) What effects might each of the following have on aggregate demand/aggregate supply? In each case use a diagram to illustrate the effect, explain why shifts occurred, and state the impact of each event on the price levels, the unemployment rate, and real GDP. a. Congress passes into law a $1.5 billion cut in personal income taxes. b. Significant technological advances in the renewable energy sector decrease the price of all electricity by 50% c. Increases in consumer confidence lead to a positive demand shock.arrow_forward1. The expenditure and tax multiplier . Take an example 2. Short-run and long-run aggregate supply. Take an example 3. Equilibrium in the AD-AS model and its changes in the short run. Take an examplearrow_forward
- 1. In the following table, determine how each event likely effects potential output (a.k.a., long-run aggregate supply). Direction of Potential Output Shift Event Left Right No Shift The government allows more immigration of working-age adults. For environmental and safety reasons, the government requires that the country’s nuclear power plants be permanently shut down. An investment tax credit increases the rate at which firms acquire machinery and equipment. 2. In the following table, determine how each event affects the position of the aggregate demand curve. Direction of AD Curve Shift Event Left Right No Shift A decrease in consumer confidence (suggests people believe a contraction/recession coming) A decrease in individual income tax rates An increase in the value/price of housing 3. What effect would an increase in aggregate demand…arrow_forwarda. What are the short-run equilibrium real GDP and price level in 2019?b. What is the long-run equilibrium real GDP?c. Is the short-run macroeconomic equilibrium a full-employment equilibrium, belowfull-employment equilibrium, or above full-employment equilibrium?d. In transition to the long run, how would the wages in this economy change?e. Following from d, explain how would the short run supply curve move to its long runposition, as the changes in the nominal wages take effect.f. What will the long run price level be?arrow_forwardWhat three factors affect long-run aggregate supply? A. Natural Resources, Technology, and unemployment B. Resources, technology, and institutions C. Interest rates, inflation, and the quantity of money D. None of the abovearrow_forward
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