Answered: 2.1. In Figure 2 above, what are the…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

ChapterD: The Expenditure-output Model

Section: Chapter Questions

Problem 24CTQ: Exercise D24 Compare two policies: a tax cut on income or an increase in government spending on...

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2.1. In Figure 2 above, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation and recession?

2.2. 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.

Describe the AS curve in the Immediate Short run.

The Keynesian AS curve
Price
Level
AS
Up to real output level Yf
increases in AD have no effect
on the price level. Increases
in AD beyond Yf cause an
e2
increase in the price level
but no increase in real output.
p1
AD2
AD
AD1
Ye
Yf
National income
(real GDP)
Copyright: www.economicsonline.co.uk

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