The economy of Winterspring is currently in an equilibrium depicted by point Eo on the graph. Now suppose that there is a demand shock in the economy and the AD curve shifts from AD to AD₁, as shown by the graph. Suppose that there is no monetary validation. Using the point drawing tool, show the short-run equilibrium that the economy will move into in this case. Label this point E₁. Carefully follow the instructions above, and only draw the required objects. Suppose that there is no monetary validation. 1.) Using the three-point curve drawing tool, show the new AS curve in the long-run. Label this curve AS₁. 2.) Using the point drawing tool, show the long-run equilibrium that the economy will move into in this case. Label this point E₂. Price Level (P) 2,400 2,200- 2,000 1,800- 1,600 1,400 1,200- 1,000+ 800- 600- 400- 200- Economy of Winterspring Y" 1.291 0+ 1,000 3,000 A Ш Eot + 5,000 AD ASO AD₁ £7.055 7,000 9,000 11,000 Real GDP (Y)

The economy of Winterspring is currently in an equilibrium depicted by point Eo on the graph. Now suppose that there is a demand shock in the economy and the AD curve shifts from AD to AD₁, as shown by the graph. Suppose that there is no monetary validation. Using the point drawing tool, show the short-run equilibrium that the economy will move into in this case. Label this point E₁. Carefully follow the instructions above, and only draw the required objects. Suppose that there is no monetary validation. 1.) Using the three-point curve drawing tool, show the new AS curve in the long-run. Label this curve AS₁. 2.) Using the point drawing tool, show the long-run equilibrium that the economy will move into in this case. Label this point E₂. Price Level (P) 2,400 2,200- 2,000 1,800- 1,600 1,400 1,200- 1,000+ 800- 600- 400- 200- Economy of Winterspring Y" 1.291 0+ 1,000 3,000 A Ш Eot + 5,000 AD ASO AD₁ £7.055 7,000 9,000 11,000 Real GDP (Y)

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1P

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To answer some parts of this question, you may need to refer to the diagram displayed below. The economy begins at the long-run equilibrium at point A, where Yo is the economy's potential GDP. LRAS P AS2 ASo AS1 В F Po AD1 ADo AD2 Y Yo Suppose the price of oil decreases in the Canadian economy. Ignore the fact that Canada is a net exporter of oil. In response to this shock, the AD curve will [ Select ] If the price level in the economy doesn't adjust (remains at price Po), there is [ Select ] goods and services in the economy. For the economy to return to equilibrium at point [ Select ] the price level must [ Select ] Hint: you can rely on your understanding of market equilibrium from microeconomics. At the equilibrium point, the economy is experiencing v [ Select ] GDP at its potential level a recessionary gap an inflationary gap
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
The graph shows long- and short-run aggregate supply curves, using modern Keynesian analysis. Suppose that a hurricane temporarily disrupts oil production. Using the line and/or the 3-point curved line drawing tool, show the effect (if any) on each curve. Properly label your curve(s). Carefully follow the instructions above, and only draw the required objects. tuestion 3.8 re to search O
A central bank forecasts a rise in raw material costs. The government plans to increase spending on health and education. The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply, AS, diagram. What would be the new equilibrium point in the short run if the forecasts prove to be accurate and the government plans are implemented? AS, AS2 general price level AS B A AD, AD AD, real output C.
Take a look again at Figure 1 (originally from the page in the text titled "Neoclassical and Keynesian Perspectives in the AD-AS Model.") Price Level Pn Pi Pk ADK AD Yk ADn Ek Keynesian zone Real GDP Ei LRAS En SRAS Neoclassical zone Intermediate zone Yi Yn Figure 1. Keynes, Neoclassical, and Intermediate Zones in the Aggregate Supply Curve. Near the equilibrium Ek, In the Keynesian zone at the far left of the SRAS curve, small shifts in AD, elther to the right or the left, will affect the output level Yk, but will not much affect the price level. In the Keyneslan zone, AD largely determines the quantity of output. Near the equilibrium En. In the neoclassical zone at the far right of the SRAS curve, small shifts in AD, elther to the right or the left, will have relatively little effect on the output level Yn, but Instead will have a greater effect on the price level. In the neoclassical zone, the near-vertical SRAS curve close to the level of potential GDP largely determines the…
Draw an AD/AS model in purely competitive long run initial equilibrium. Label the price level P*=100 and YF=10. Label the SRAS1 and the AD1 curve. Label the LRAS1 curve. Be sure to also label both axis correctly.] Draw a graph of the "business cycle." Show the long run growth trend line (put a trend percentage the "makes sense") and the cyclical curve around that trend line. Be sure to also label both axis correctly. Label point A on both graphs in #1 and #2 above. Then on graph in #1, indicate the full employment level (i.e., the "usual" unemployment rate in LR initial equilibrium) at point A for YF* (at full potential output) in initial equilibrium. Assume an Increase in AD for any reason (increase in Aggregate Demand) and show it on graph #1 above. Then, Label point B on all applicable graphs above (after the increase in AD), at the intersection of the new equilibrium. -is point B a Short run or Long run equilibrium point? -Indicate the new unemployment rate at Point B that makes…
This question considers the impact of a tax decrease in the AD-AS framework. The figure depicts an economy in which output equals potential. Suppose that the government gives households a tax rebate. 1.) Using the line drawing tool, draw the short-run effect of the government giving households a tax rebate. Properly label this line. 2.) Using the point drawing tool, plot the new short-run equilibrium. Label this point 'e₁'. Carefully follow the instructions above and only draw the required objects. Price Level LRASO eo Real GDP, Y ($, Trillions) SRASO ADO Select Line Point
Describe how a decrease in government defense spending causes the AD curve to shift. What is the effect on the price level and output in the short run? In the long run? Please give me correct answer and full explanation otherwise i give multiple downvote Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
Which of the following is a statement that you would AGREE with? Explain why. Use the AD-AS model. Assume the ceteris paribus assumption holds in all cases and that the economy is initially in short run macroeconomic equilibrium. 1. We observe a decrease in the price level and a decrease in real GDP. A possible explanation is an increase in expected future income or decrease in interest rates. 2. We observe a decrease in the price level and a decrease in real GDP. A possible explanation is an expansionary monetary policy or an increase in government spending. 3. We observe an increase in the price level and an increase in real GDP. A possible explanation an increase in expected future profit or an expansionary fiscal policy.
Suppose the economy is initially in a long-run equilibrium. Using the AD-AS framework, show graphically what happens to output, unemployment, and the price level when there is an adverse supply shock such as a persistent increase in international oil prices due to a war in oil producing countries (think of Russia's war with Ukraine). 1. Indicate in the space provided what happens to the following variables (whether it increases, decreases or remains unchanged) in the short run after the shock occurs, and in the final long run equilibrium. Short Run Eq. Output Unemployment Price Final Long Run Eq.* *Indicate below the direction of change in the variables as the economy moves from the short run to long run equilibrium and also the final values of Y and u. Show any changes in the graph as the economy moves from short run to long run equilibrium. Output Unemployment Price Graph: (use only one graph to show the initial, short run and long run equilibrium) 2. If the government wants to…
n the AD-AS model, assume that an economy’s aggregate demand, denoted by QD=400−P, and SR aggregate supply, denoted by QS=P, currently intersect at price level = $200 and the full employment output level = 200. What curve would have shifted if a new short-run equilibrium were to occur at an output level of 300 and a price level of $300? Group of answer choices SRAS shifts leftward. AD shifts leftward. SRAS shifts rightward. AD shifts rightward.
For each of the three theories for the upward slopeof the short-run aggregate-supply curve, e<~rcfullyexplain the following:tl. how the economy recovers from a recession andreturns to its long-run equilibrium without anypoUcy inrerventionb. what determines the speed of that recovery