EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 37, Problem 6RQ
To determine
Relationship between price level and output.
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Students have asked these similar questions
Suppose 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…
: 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
demanded 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…
Chapter 37 Solutions
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Similar questions
- d. A decrease in aggregate demand. e. An increase in aggregate demand that exceeds an increase in aggrega supply.arrow_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_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_forward
- 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?arrow_forwardAggregate 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_forward
- Why is the aggregate demand curve downsloping? Specify how your explanation differs from the explanation for the downsloping demand curve for a single product. What role does the multiplier play in shifts of the aggregate demand curve?arrow_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_forwardQUESTION 40 B LRAS XXI AD 10 20 30 40 50 real GDP = Q 60 50 40 30 20 10 P level A LRAS -AS- real GDP = Q AD 10 20 30 40 50 40. Which of the figures above illustrates the problem of recessionary gap? O a) Figure A b) Figure B c) Figure C 60 50 40 30 20 10 P level AS 60 50 40 30 20 10 P level C LRAS -AS real GDP = Q AD 10 20 30 40 50arrow_forward
- 9:22 1 LTE 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…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 $____ billion..arrow_forwardPrice level LRAS AS1 Figure 12.8 C B A ASO AS₂ AD₁ ADO E Y2 Yo Y₁ Aggregate output ($ 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_forward
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