EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 36, Problem 4DQ
To determine
Some similarities in the two cases: the distinctions between short run aggregate supply and long run aggregate supply and the distinction between the short run Phillips Curve and the long run Phillips Curve.
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Students have asked these similar questions
Suppose that the Phillip's curve and Okun's law are given, respectively, by
n=n² - (U-U")
and
U-U^----(Y-P²)
where is expected inflation, U" is the natural rate of unemployment, and Y is potential output. Supposing that = 22, U" =4, and Y² = 24, solve for the aggregate supply curve.
O
O
O
17--2
10+
1
x=10+ - Y
=10--Y
- 12/1
Assume that the Phillips curve equation is represented by π = +0.1 - 2ut where π = 0-1. Suppose that
0 = 1 and the inflation rate is ₁ = 3% at t = 1. What is the actual rate of inflation for t = 3 if the government
maintains an unemployment rate of 3% each period?
O 11%
O 3%
O 15%
5%
O 7%
Refer to the figure A above.
Figure A
Figure B
Price
Price
P3
P2
`D,
P,
D2
Q,
Quantity
Q, Q2 Q,
Quantity
Assuming this market is representative of the economy as a whole, a negative
demand shock will:
1) increase both the price level and the quantity of output produced.
2) increase output, but leave prices unchanged.
O 3) lower the price level, but leave output unchanged.
4) raise the price level, but leave output unchanged.
Chapter 36 Solutions
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- d. A decrease in aggregate demand. e. An increase in aggregate demand that exceeds an increase in aggrega supply.arrow_forwardDemand-pull inflation is caused by an increase in aggregate demand to an equilibrium point below full employment. an increase in aggregate demand to an equilibrium point beyond full employment. a decrease in short-run aggregate supply to an equilibrium point below full employment. O a decrease in short-run aggregate supply to an equilibrium point beyond full employment. Cost-push inflation is caused by O a decrease in short-run aggregate supply to an equilibrium point beyond full employment. O a decrease in short-run aggregate supply to an equilibrium point below full employment. an increase in aggregate demand to an equilibrium point below full employment. an increase in aggregate demand to an equilibrium point beyond full employment.arrow_forwardRemaining Time: 16 minutes, 20 seconds. Question Completion Status: A Moving to another question will save this response. Question 15 Phillips Curve shows possible combinations of the Unemployment rate inflation rate Wage Rate Income Level bike.jpg * 3 Sc bike 2.jpg 96°F Clear 1 ? Q f2 @ 2 34 # E f4 0 $ 4 and the % R bike 2 LO 5 40 T [Select ALL that apply] 6 G & bike jpg. ❖ 7 Yarrow_forward
- 4. LO 4 In Figure 3.11, after the 1981-1982 reces- sion, does the price level appear to be procyclical, countercylical, or acyclical? Why is this important?arrow_forwardSuppose āc = 0.75, ā; = 0.20, āg = 0.20, āea = 0.10, and ājim R+, ā equals 0.20. For any given and the economy O 0; is in its long-run equilibrium O 1.05; has experienced a positive aggregate demand shock O 0.45; has experienced a positive aggregate demand shock O -0.15; has experienced a negative aggregate demand shock O 0.05; has experienced a positive aggregate demand shockarrow_forwardBased on the aggregate supply relation, an increase in current output will cause Select one: O a. a change in the expected price level this year. O b. a shift of the aggregate supply curve. O c. an increase in the expected price level and an upward shift of the AS curve. O d. an increase in the current price level.arrow_forward
- The figure below shows the short-run aggregate demand and supply curves of an economy. In this figure, the distance between Y1 and Y2 represents: Figure 10.2 Price level Potential output SRAS AD Real GDP a. a recessionary gap. b. the full employment output. O . the natural rate of unemployment. d. a cost-push inflation. e. an expansionary gap.arrow_forwardSuppose that the table presented below shows an economy's relationship between real output and the inputs needed to produce that output: Input Quantity Real GDP 150.0 $ 400 112.5 300 75.0 200 Instructions: Enter your responses answers rounded to 2 decimal places. a. What is the level of productivity in this economy? b. What is the per-unit cost of production if the price of each input unit is $2? $ C. Assume that the input price increases from $2 to $3 with no accompanying change in productivity. What is the new per-unit cost of production? In what direction would the $1 increase in input price push the economy's aggregate supply curve? (Click to select) v What effect would this shift of aggregate supply have on the price level and the level of real output? O The price level would decrease and real output would increase. O Both the price level and real output would remain the same. O The price level would decrease and real output would remain the same. O The price level would increase…arrow_forwardQUESTION 37 Suppose that in a given economy the inflation rate increases from 2% to 3% and national output falls from £600 billion to £560 billion in the course of a year. What is the likely cause of this situation? O a. Demand pull inflation. O b. Flexible prices in declining industries. O c. Higher input prices. O d. A shift of the aggregate demand curve to the left. 4arrow_forward
- Suppose n=n²_. - and U-8"---—(X-X²) =- = where is expected inflation, U" is the natural rate of unemployment, and YP is potential output. Supposing that = 0, U" =45, and Y² = 160, solve for the aggregate supply curve. O O that the Phillip's curve and Okun's law are given, respectively, by (U-U") O O л=-20+ 0+ 1/ Y 0+ 1/1 Y π = 20+ 0+ 1/ Y y π = - 40+ x=40+ Yarrow_forwardSuppose aggregate demand in the economy sharply decines. Keynesian economists say that the price level (at least for a time) will and real output wil O remain constant; decrease Increase; remain constant remain constant; increase decrease; remain constant lo000arrow_forwardInflation VPC Y = £200 billion Output Figure 12 Current and equilibrium output In Figure 12 the economy's current output is £200 billion and the equilibrium level of output is shown by the position of the Vertical Phillips Curve (VPC). Which of the following policies could be adopted to achieve a zero output gap? (Choose one or more answers.) Select one or more: O A. An increase in income tax. O B. A quantitative easing initiative. O C. An increase in interest rates. O D. A cut in Value Added Tax. MacBook DII DD F9 000 000 F8 F7 F6 F4 F5arrow_forward
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