Refer to Pessimism. How is the new long-run equilibrium different from the original one? O 1) both price and real GDP are higher. 2) both price and real GDP are lower. 3) the price level is the same and GDP is lower. 4) the price level is lower and real GDP is the same.

Refer to Pessimism. How is the new long-run equilibrium different from the original one? O 1) both price and real GDP are higher. 2) both price and real GDP are lower. 3) the price level is the same and GDP is lower. 4) the price level is lower and real GDP is the same.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter8: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 8QP

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Question

Pessimism (suggestion: draw the AS-AD diagram to help your analysis and start with
the long-run and short-run equilibrium, i.e. the intersection of LRAS, SRAS and AD
curves)
Suppose the economy is in long-run equilibrium. Then because of corporate scandal,
international tensions, and loss of confidence in policymakers, people become
pessimistic regarding the future and retain that level of pessimism for some time.
Refer to Pessimism. How is the new long-run equilibrium different from the original
one?
O 1) both price and real GDP are higher.
2) both price and real GDP are lower.
3) the price level is the same and GDP is lower.
4) the price level is lower and real GDP is the same.

Increased government spending on national defense would result in
Increase in output and decrease in price in the short run
Increase in output and increase in price in the short run
Decrease in output and decrease in price in the short run
Decrease in output and increase in price in the short run

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Pessimism (suggestion: draw the AS-AD diagram to help your analysis and start with the long-run and short-run equilibrium, i.e. the intersection of LRAS, SRAS and AD curves) Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time. Refer to Pessimism. In the short run what happens to the price level and real GDP? O 1) Both the price level and real GDP rise. 2) Both the price level and real GDP fall. 3) The price level rises and real GDP falls. 4) The price level falls and real GDP rises.
price level LRAS SRAS1 SRAS2 D Refer to the above Figure. If the economy is AD1 AD2 quantity of output at A and there is a stock market crash, in the short run the economy 1) stays at A. 2) moves to B. 3) moves to C. 4) moves to D.
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Suppose the Australian government increases the level of government spending. Explain how an increase in government spending impacts upon the position of the AD and AS curves. Use a relevant diagram and explain your answer in detail.
For each situation below, analyse whether it shifts the aggregate demand (AD) curve, the aggregate-supply (AS) curve, both, or neither. Then, if it does shift a curve, construct the AD-AS diagram to show the effect on the economy in the long-run. a) One extraordinary impact of COVID-19 pandemic to the U.S. economy is a massive increase in saving. U.S. recorded nearly tripled saving over the first two quarters of 2020, from $1.59 trillion annualized in the first quarter to $4.69 trillion in the second, which is by far the biggest increase in modern history. b) The prolonged monsoon rain has caused the production of vegetables in Cameron Highlands fell by about 30%. It has severely impacted a lot of crops, including fruits and flowers. Besides, labor shortages due to the pandemic makes the matters worse.
On the graph, label your starting AD line as AD 2019. Draw a new AD line showing the change to AD due to the pandemic. Label your starting SRAS line as SRAS 2019. Draw a new SRAS line showing the change to supply due to the pandemic.Label the new short-run equilibrium RGDP and Price Level. Does output (i.e. RGDP) increase or decrease in your model? Does the price level increase or decrease in your model? According to the AD-AS model when RGDP falls the unemployment rises and vice versa. Does your graph indicate an increase or decrease in the unemployment rate
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