EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 36, Problem 6RQ
To determine
Aggregate demand and aggregate supply model to depict the given scenario.
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Aggregate D&S assignment chap 12....
Assignment Chapter 12
1. Suppose that the aggregate demand and aggregate supply
schedules for a hypothetical economy are as shown below: LO5
Amount of
Amount of
Real GDP
Real GDP
Demanded,
Billions
Price Level
Supplied,
Billions
(Price Index)
$100
300
$450
200
250
400
300
200
300
400
150
200
500
100
100
a. Use these sets of data to graph the aggregate demand and
aggregate supply curves. What is the equilibrium price level and the
equilibrium level of real output in this hypothetical economy? Is the
equilibrium real output also necessarily the full-employment real
output?
b. If the price level in this economy is 150, will quantity demanded
equal, exceed, or fall short of quantity supplied? By what amount? If
the price level is 250, will quantity demanded equal, exceed, or fall
short of quantity supplied? By what amount?
c. Suppose that buyers desire to purchase $200 billion of extra real
output at each price level. Sketch in the new…
: Which of the following statements is true if there is an increase in aggregate demand while the economy is
in equilibrium on a positively sloping short-run aggregate supply curve?
3 -
O a) Prices rise, national income does not change
B) Prices decrease, national income does not change
O C) Prices go up and national income goes down.
O D) Prices decrease and national income decreases.
O TO) Prices rise, national income rises
5. Refer to the data in the table that
accompanies problem 2. Suppose that
the present equilibrium price level and
level of real GDP are 100 and $225, and
that data set B represents the relevant
aggregate supply schedule for the
economy. LO12.6
a. What must be the current amount of
real output demanded at the 100 price
level?
b. If the amount of output demanded
declined by $25 at the 100 price level
shown in B, what would be the new
equilibrium real GDP? In business
суcle
economists call this change in real
terminology,
what
would
GDP?
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_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_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_forward
- Aggregate demand is defined as O the relationship between the total quantity of goods and services demanded and the income level, all other determinants of spending unchanged. the relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged. the demand for goods and services generated by all sectors in the economy, holding price level constant. O the relationship between the total quantity of goods and services demanded and the supply of factors of production, all other determinants of production unchanged.arrow_forwardSuppose 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?arrow_forwardSuppose 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..arrow_forward
- Which of the following both shift aggregate demand right? O A. net exports rise for some reason other than a price change and the money supply rises. O B. net exports rise for some reason other than a price change and the price level rises. O C. net exports fall for some reason other than a price change and the money supply rises. O D. net exports fall for some reason other than a price change and the price level rises.arrow_forwarddemanded equal, exceed, or fall short of quantity supplied? llowing L012.4 c. Suppose that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate By what amount? demand curve as AD,. What are the new equilibriumsate Real GDP level and level of real output? 4. Suppose that the table presented below shows an economy's relationship between real output and the inputs needed to pro- 225 225 duce that output: LO12.4 225 Real GDP 225 Input Quantity 150.0 $400 in the t run? 112.5 300 75.0 200 ut per a. What is 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 $1 increase in input price push the economy's aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the…arrow_forwardThe figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model. Figure 8.3 U.S. Price Level 100 m 9 AS₁ to AS3 AS₁ to AS₂ AD₂ toAD3 O AD₂ to AD₁ O AD₁ to AD₂ AS AS₁ 200 300 400 500 Real GDP (billions of dollars) AD AS₂ In Figure 8.3, which of the following shifts would result in stagflation (economic stagnation and inflation)?arrow_forward
- Price level LRAS AS1 Figure 12.8 C B A ASO AS₂ AD₁ ADO E Y2 Yo Y₁ Aggregate output ($ billion) AD₂ Refer to Figure 12.8. This economy cannot continue to produce Y₁ (or at point B) because O the price of raw material will increase, shifting the aggregate demand curve to AD2. O all of the above O the price of raw material and wages will increase shifting the aggregate supply curve to AS₁. O the price of inputs will decrease, shifting the aggregate supply curve to AS2.arrow_forwardPrice Level LAS SAS, SAS, AD SAS, AD, AD, Real Output Refer to the graph. Suppose the economy is at SAS, and AD₂. What is a possible way the economy can return to potential output? What dynamic price level feedback effect could prevent the return to potential output? How would the dynamic price level feedback effect show up in the graph? O A decrease in asset prices in the economy; a decrease in asset prices would further decrease AD; a shift in AD from AD2 to AD3 O A decrease in material costs in the economy; a decrease in material costs would decrease AD; a shift in AD from AD2 to AD1 A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD from AD2 to AD3 A decrease in wages in the economy; a decrease in wages would further decrease AD; a shift in AD from AD2 to AD1arrow_forward8. Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? L012.6 a. An increase in aggregate demand. b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in aggregate demand. e. An increase in aggregate demand that exceeds an increase in aggrega supply.arrow_forward
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