EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 37, Problem 2RQ
To determine
Sticky price and changes in aggregate supply curve .
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Students have asked these similar questions
According to the "4-Quadrant Model" (4QM), which of the following statement is correct?
O If there is a positive demand shock in the space market, the housing rent is going to increase in the short run,
and will be lower than the current rent in the long run.
If there is a positive demand shock in the space market, the housing price is going to decrease in the short run,
and increase in the long run.
If there is a positive demand shock in the asset market, the housing rent is going to decrease in the long run.
O If there is a positive demand shock in the asset market, the housing price is going to decrease in the short run,
and will be lower than the current price in the long run.
How can they say that "Rising prices are symptom of an expanding current supply"?
The 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
B
O AD, toAD;
O AD, to AD₂
O AD₂ to AD₁
O AS, to AS;
AS; to AS₂
100 200 300 400
AS3
AS₁
AD₂
500
Real GDP (billions of dollars)
AD
AS₂
AD3
In Figure 8.3, which of the following shifts would result in stagflation (economic stagnation and inflation)?
Chapter 37 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
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- Explain what would happen in the following markets given the following demand or supply shocks. In your answer clearly state what happened to supply or demand (whether it increased or decreased) and what would likely happen to the equilibrium price and quantity as a result, other factors constant. Market: Electric vehicles. Shock: Due to the recently enacted CHIPS Act, there is a significant decrease in the price of U.S. semiconductors, which are used as an input in the production of electric vehicles. Market: In home exercise equipment. Shock: Due to the waning concerns around the COVID-19 pandemic and loosening restrictions, U.S. consumers go back to gyms and public recreational centers. Market: U.S. Cotton. Shock: There is a significant drought in the Southwestern U.S., where the majority of U.S. cotton is grown. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for…arrow_forwardFor a given aggregate supply curve, if the aggregate price level in an economy rises, O real GDP increases aggregate supply increases aggregate demand increasesarrow_forward2.3. In macroeconomics, the immediate short run is known as a length of time when both input prices and output prices are fixed. In the short-run, input prices are fixed but output prices are variable. In the long run, input prices and output prices can vary. What happens in the immediate short-run when AD rises from AD to AD2 to the price level and output? What happens in the short-run when AD falls from AD to AD1 to the price level and output? What will happen in each case in the long-run?arrow_forward
- Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expectedeffects on the equilibrium price level and the level ofreal output.a. A reduction in the economy’s real interest rate.b. A major increase in federal spending for healthcare (with no increase in taxes).c. The complete disintegration of OPEC, causing oilprices to fall by one-half. d. A 10 percent reduction in personal income taxrates (with no change in government spending).e. A sizable increase in labor productivity (with nochange in nominal wages).f. A 12 percent increase in nominal wages (with nochange in productivity).g. A sizable depreciation in the international value ofthe dollar.arrow_forwardIn 2013, Prussia's aggregate demand curve was determined by the equation M + 1-4% A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph Which of the factors could have resulted in the change irn aggregate demand seen between 2013 and 2014? 13 AD 2013 an improvement in technology O an increase in imports O higher consumer confidence O a decrease in oil prices 12 AD 2014 10 8 5 4 3 2 4 -3 2 1 0 1 2 3 4 5 6 78 9 10 Real GDP growth ratearrow_forwardOn the following graph, use the purple Mine (diamond symbol) plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange ne segments (square symbol) to plat the economy's shart-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120, PRICE LEVEL 116 110 105 100 80 75 0 + 10 20 30 40 90 70 OUTPUT (ons of dollars) 85 120 AS LRAS The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the pricearrow_forward
- Use graph A on the right to determine what happens to the equilibrium values of the price level and aggregate output when there is a decrease in the price of oil with no change in government spending. Graph A AS 1.) Using either the 3-point curved line drawing tool to shift the AS curve or using the line drawing tool to shift the AD curve, illustrate the impact of the decrease in the price of oil. Properly label your curve. 2.) Using the point drawing tool, identify the economy's new equilibrium point. Carefully follow the instructions above and only draw the required objects. AD Yo Aggregate output (income), Y Price level, Parrow_forwardIf households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?arrow_forwardSuppose the economy is in a long-run equilibrium, as shown in the following graph. Now suppose that firms become pessimistic about future business conditions and decide to cut back on investment spending, resulting in a fall in aggregate demand. Use your diagram to show what happens to output and the price level in the short run, Price Level LRAS Aggregate Supply Quantity of Output As a result of this change, the unemployment rate Aggregate Demand On the graph, illustrate the change that will occur in the long run. 1 Aggregate Supply LRAS ? Use the sticky-wage theory of aggregate supply to think about what will happen to output and the price level in the long run (assuming there is no change in policy).arrow_forward
- Price Level 6 ASO ADO AD₁ a b c Real GDP Refer to the figure above. If aggregate supply is AS, and aggregate demand is ADo. then: f represents a price level that would result in a shortage of real output of ac f represents a price level that would result in a surplus of real output of a at any price level above g, a shortage of real output would occur f represents a price level that would result in a surplus of real output of ac a surplus of real output of gh would occurarrow_forwardSuppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose potential GDP (LRAS) equals to $2,700 are given by the table. Now suppose aggregate demand increases by $700 at each price level; for example, the new aggregate demanded at a price level of 50 now equals to $4,200. How will the shift in AD change the original output, price level, and employment? Name one factor that can cause the increase in aggregate demand and the shifting of the curve.arrow_forward2) Use the table above to answer the following questions.a) What is the value of real GDP and price level at the long run macroeconomic equilibrium?b) What is the value of real GDP and price level at the short run macroeconomic equilibrium?c) Is the short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium?d) How will this economy return to its long run equilibrium? Explain using self-correctingmechanism.arrow_forward
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