2. The 1974-1975 recession clearly illustrates how a supply shock affect the economy. Following the Arab-Israeli War of 1973, the Organization of Petroleum Exporting Countries (OPEC) took action that increased the price of a barrel of oil from less that $3 to more than $10. Use the information and the statistics in the following table to draw a dynamic aggregate demand and aggregate graph showing supply macroeconomic equilibrium for 1974 and 1975. Assume that aggregate demand curve did not shift between 1974 and 1975. Provide a brief explanation of your graph. Actual Real GDP Potential GDP Price Level 1974 $5.39 trillion $5.42 trillion 28.7 1975 $5.38 trillion $5.61 trillion 31.4 Esibility: Investigate

2. The 1974-1975 recession clearly illustrates how a supply shock affect the economy. Following the Arab-Israeli War of 1973, the Organization of Petroleum Exporting Countries (OPEC) took action that increased the price of a barrel of oil from less that $3 to more than $10. Use the information and the statistics in the following table to draw a dynamic aggregate demand and aggregate graph showing supply macroeconomic equilibrium for 1974 and 1975. Assume that aggregate demand curve did not shift between 1974 and 1975. Provide a brief explanation of your graph. Actual Real GDP Potential GDP Price Level 1974 $5.39 trillion $5.42 trillion 28.7 1975 $5.38 trillion $5.61 trillion 31.4 Esibility: Investigate

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter33: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 5PA

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What are the factors other than price that can shift aggregate demand curve interms of investment and consumption? Also explain graphically.
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 100 m 9 AS₁ to AS3 AS₁ to AS₂ AD₂ toAD3 O AD₂ to AD₁ O AD₁ to AD₂ AS AS₁ 200 300 400 500 Real GDP (billions of dollars) AD AS₂ In Figure 8.3, which of the following shifts would result in stagflation (economic stagnation and inflation)?
In 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 rate
2. In the space below, insert the names for X and Y axis, graph LRAS and AD (Aggregate Demand) line, and identify/label equilibrium
130 120 SAS 110 A 100 AD 90 15.0 15.5 16.0 16.5 17.0 17.5 Real GDP (trillions of 2009 dollars) In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $15.0 trillion, then it must be the case tha aggregate supply has increased. aggregate supply has decreased. aggregate demand has increased. O aggregate demand has decreased Price level (GDP deflator, 2009-100)
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)?
Note: Line segments will automatically connect the points. PRICE LEVEL (Billions of dollars) 200 160 120 0 80 160 240 REAL GDP (Index numbers) The equilibrium price level is 320 400 Initial AD The change in government spending the multiplier effect. SRAS New AD ✓, and the equilibrium level of real output is Suppose that the government spending increases by $16 billion and the expenditure multiplier in this economy is 5. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. the equilibrium level of real output by . The price level increase
8. Suppose that aggregate demand and supply for a hypothetical economy are as shown: P Amount of real Price Amount rea AS GDP level GDP supplie demanded, billions (price index) billions 100 300 450 200 250 400 AD' 300 200 300 AD 400 150 200 500 100 100 Real 100 200 300 400 GDP 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? Equilibrium price level = Is the equilibrium real output also necessarily the full-capacity real output? (Yes, No ) The full-capacity level of GDP is more lil cut at $ а. Equilibrium real output = $ billion billion. b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250? billion, (more, less ) than billion. The (shortage, surplus) of real output will drive the At a price level of 150, real GDP supplied is a maximum of $ the real GDP demanded of $ price level up. At a price level of 250,…
Explain the influence of the following events on the quantity of real GDP supplied and aggregate supply in India. When fuel prices rise When the price level in India increases A. short-run aggregate supply decreases; the quantity of real GDP supplied increases O B. long-run aggregate supply decreases; short-run aggregate supply increases OC. long-run aggregate supply increases; the quantity of real GDP supplied increases OD. short-run aggregate supply increases; the quantity of real GDP supplied decreases The graph gives the long-run aggregate supply curve and the short-run aggregate supply curve for India. Suppose Canadian firms move their call handling, IT, and data functions to India. The full-employment price level does not change. If long-run aggregate supply changes, draw the new long-run aggregate supply curve and label it. If short-run aggregate supply changes, draw the new short-run aggregate supply curve and label it. Draw a point at the full-employment price level at…
Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown in the following table. Amount of Real GDP Demanded, Amount of Real GDP Supplied, Billions Price Level1 Billions (Price Index) $ 100 $ 200 $ 300 $ 400 $ 500 300 $ 450 250 400 200 300 150 200 100 100 a. Use the data above to graph the aggregate demand and aggregate supply curves. Instructions: (1) Use the tools provided 'AD' and 'AS' to draw the aggregate demand and aggregate supply curves (plot 5 points total for each curve). To earn full credit for this graph, you must plot all required points for each curve. (2) Use the tool provided 'Eq' to indicate the equilibrium price level and the equilibrium level of real output. 350 Tools 300 AD AS 250 200 Eq 150 100 50 100 200 300 400 500 600 700 Real domestic output (billions of dollars) Price level
5. Determine the effect of the following events would on the aggregate demand (AD) curve whether shifting AD to the right (R) or to the left (L). Then indicate reasons why relating to the question 3. Think graphically! (a) After a budget surplus, Congress moves to cut personal income taxes. This will shift AD to the ) because ( increase, decrease ) in consumer spending. (b) A boost in research and development by computer companies produces more powerful and efficient computers and equipment. This will shift AD to the ( ) because ( increase, decrease ) in spending. (c) Income rises in several countries that trade heavily with the U.S. This will shift AD to the ( ) because ( increase, decrease ) in spending. What if prices fall across several industries? Then AD curve will (shift outward, shift inward, not shift ). This is because prices ( are, are not ) a component of AD. Rather, a fall in prices will cause a movement ( upward, downward ) along the AD curve.
2. An introduction to the AD-AS model The aggregate demand and aggregate supply model is a useful simplification of the macroeconomy used to explain short-run fluctuations in economic activity around its long-run trend. The vertical axis of a diagram of the aggregate demand and aggregate supply curves measures which of the following? An economy’s price level The amount of a particular representative good produced in the economy The price of a particular representative good produced in the economy Which of the following are reasons that the short-run aggregate supply curve slopes upward? Check all that apply. As the price level rises, firms expand their production because they can sell their output for more money. As the price level rises, firms find it more profitable to hire workers at any given wage. As the price level rises, firms decrease their investment because it is more expensive to purchase capital.