EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 36, Problem 7RQ
To determine
The inverse relation between inflation rate and unemployment rate by using the AD-AS model.
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Students have asked these similar questions
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?
d. A decrease in aggregate demand.
e. An increase in aggregate demand that
exceeds an increase in aggrega
supply.
The previous year had an unemployment rate of 14.1%, nominal GDP of $28.9 trillion, and real
GDP of $26.1 trillion. If the unemployment rate changes to 18.6% and overall price levels remain
constant, which choice below could be the current year nominal GDP?
O $39.3 trillion
O $39.2 trillion
$39.1 trillion
O $28.0 trillion
Chapter 36 Solutions
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- Figure 13-4 Price level 112 110 8% O 12% 10% LRAS O 9.1% LAAS SRAS, 11.0 118 12.1 AD, SRAS Refer to Figure 13-4. In the figure above, LRAS₁ and SRAS1 denote LRAS and SRAS in year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in year 1, what is the growth rate in potential GDP in year 2? AD₂ Real GDP (trillions of dollars)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_forwarde Page 426 13.1. What is the aggregate demand-aggregate supply model? Fill in the blanks to complete the following passage concerning the history of U.S. recessions. Since the year 1900, the United States has experienced recessions. Since 1970, recessions have occurred. 2 7 22 42 + LO 5 10arrow_forward
- 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%arrow_forwardQuestion Completion Status: A Moving to another question will save this response. estion 15 Phillips Curve shows possible combinations of the Unemployment rate inflation rate Wage Rate Income Level A Moving to another question will save this response. bike 2.jpg bike.jpg 101°F Sunny Q ? (a 12 2 33 # 3 E IOI $ 4 and the S R % bike 2 LO 5 74 16 T [Select ALL that apply] 6 & bike jpg. 18 7 Yarrow_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
- Remaining 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_forwardBecause the long-term trend has been for prices to rise, adjusting Nominal GDP to Real GDP involves inflating the lower prices before the base year and deflating the higher prices after the base year. 1) True O 2) False e Type here to search 00arrow_forwardExhibit 14A-2 Macro AD-AS Model Price Level CPI 130 120 110 100 90 O J T 1 1 1 17 1 1. 1 IN F I 1 1 9.0 1 N 1 LRAS 1 SRAS AD LL 9.5 10.0 10.5 11.0 11.5 Real GDP (trillions of dollars per year) In Exhibit 14A-2, the intersection of AD with SRAS indicates: O a short-run equilibrium. O a long-run equilibrium. O that the economy needs policies to reduce unemployment. O that the economy is at full employment.arrow_forward
- Suppose that the actual unemployment rate in a country is 7.7 percent. If the country's frictional unemployment rate is 3.5 percent and its structural unemployment rate is 1.1 percent, what is its cyclical unemployment rate? O 11.7 percent O 3.1 percent O 5.3 percent O 4.1 percent ۵arrow_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_forwardpre to co Price Level 0 I I 2 I I 4 1 6 8 10 12 14 Real GDP (Trillions Dollars) SRAS AD 16 18 20 AD SRAS Which of the following best describes the effect of an increase in wage rates? O The price level remains the same, but the Real GDP decreases to $6 trillion. O The price level falls below PE, and the Real GDP increases to $6 trillion. The price level rises above PE, and the Real GDP decreases to $6 trillion. O The price level rises above PE, but the Real GDP remains the same.arrow_forward
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