Aggregate Demand (AD) - According to the Total Supply (AS) Model, by comparing the initial equilibrium situation that will occur due to the realization of the following two developments together in an economy and the last equilibrium state in terms of the change in the General Level of Prices and Equilibrium National Income (increases / decreases / does not change). a) The state increases the transfer expenditures. b) Increasing monopolization tendency in the economy.
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Aggregate Demand (AD) - According to the Total Supply (AS) Model, by comparing the initial equilibrium situation that will occur due to the realization of the following two developments together in an economy and the last equilibrium state in terms of the change in the General Level of Prices and Equilibrium
a) The state increases the transfer expenditures.
b) Increasing monopolization tendency in the economy.
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- Consider the following demand components: Consumption described as a following: 100 million USD as an autonomous level of consumption plus 95% of disposable income spends on consumption. I = 30 G=15 T= 20 (a)Assuming goods market equilibrium, show equilibrium level of output in this economy. (b)How much output increase, if G increase from 15 to 20, show your calculations.The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion. Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand. Change required to increase AD Expected rate of return on investment. (decrease/increase) Incomes in other countries (decrease/increase) Consumer expectations about future profitability. (improve/worsen) Government spending (increase/decrease)Let the national income model be; Y = C + I0 + G , C = a + b ( Y – T) , G = g Y Identify endogenous variables Find the equilibrium national income Find equilibrium consumption(using static equilibrium & matrix algebra both
- Assuming that there is no government spending or trade, an economy’s GDP is the sum of domestic consumption C and investment I, i.e. Y = C+ I Assume that I is unaffected by GDP Assume the consumption function is C = c0 + c1Y In any equilibrium aggregate demand, AD must be equal to Y, GDP. Given this model, which of the following statements is correct? choose 5 Select one or more: a. In a demand-driven economy demand is equal to supply in equilibrium b. In a demand-driven economy, supply creates its own demand c. The aggregate demand equation is given by AD = c0 + c1Y + I d. If the economy above is a demand-driven economy, then the equilibrium solution for Y is given by Y = (c0 + I)/(1-c1 ) e. In a demand-driven economy the AD curve is a vertical line f. In a supply-driven economy demand is equal to supply in equilibrium g. if c1 is a number between 0 and 1, and I+c0 >0 then the aggregate demand equation is a straight line that must intersect the…As you know, supply and demand shifts are caused by one of their determinants. Shifts in aggregate demand (AD) show the effect of events on price level and Real GDP. Any event that causes a change in consumer, business, or government spending or any change in net exports (C+l+G+Xn) will shift AD. Any event that causes a change in production costs or increases productivity will shift aggregate supply (AS). Decide if the following events are Micro, shifting supply or demand, or Macro, shifting AD or AS. Give the direction in which the graph shifts. Demand Situation Aggregate Supply Aggregate Demand Supply Sales of Atlanta Braves gear grows with the success of the team. 1. The President and Congress pass a trillion dollar stimulus bill to provide aid during recession. 2. 3. Salmonella outbreak in peanut processing plants threatens lunches for school children. 4. Pomegranates are shown to be cancer fighting superfoods. Value of U.S. dollars declines, exports increase. 5. Global oil prices…Assuming that there is no government spending or trade, an economy’s GDP is the sum of domestic consumption C and investment I, i.e. Y = C+ I Assume that I is unaffected by GDP Assume the consumption function is C = c0 + c1Y In any equilibrium aggregate demand, AD must be equal to Y, GDP. Given this model, which FIVE of the following statements are correct? Select one or more: A. If the economy above is a demand-driven economy, then the equilibrium solution for Y is given by Y = m(c0 + I), where m = 1/(1 - c1) is the multiplier. B. if c1 = 0.8 the multiplier is equal to 1/0.8= 1.25 C. if c1 = 0.75 the multiplier is equal to 4 D. assume c0 =100, I=50, c1=0.6. The equilibrium value of Y in a demand-driven economy is 300. E. Assume that Y is initially 400, I is initially 100, and the multiplier is 2.5. I increases by 10%. The multiplier implies that in equilibrium Y will increase by 25%. F. The higher is c1 the larger is the multiplier G. If consumers…
- Suppose that the production function for the economy is given by: Y = AL/3K/3 Suppose that this economy has 1,000 units of Labour, and 125 units of capital, and TFP (A) is equal to 10. The Short-Run Aggregate Supply Curve (AS) here is given by: Y = 5p And when we consider the AEF at a price level of $1,400, the main components of it (C, I, & G) are given by (we are assuming a closed economy NX = 0): C = 300 + 0.8Y I = 300 G = 200 1. What is potential GDP in this question (Y*)? Show your work. Suppose also that for any $10 decrease in price, desired consumption will increase by $5. 2. Write down the equation for the Aggregate Demand Curve (AD) in the form of Y = a + bp. Show your work. 3. What is the current Short-Run Equilibrium value for Real GDP (Y) and the price level (p)? Show your work. 4. Draw the AD, AS, and LRAS curves. Label all x-intercepts and y-intercepts. Are we currently in an Inflationary Gap, Recessionary Gap, or in Long-Run Equilibrium? How do you know?An economy is described by the following: C=20+0.9Y I=120-200r Md=250+0.2Y-400r Ms/P=1250 Y=70 W=17.5 Lf=144 a) Find agregate supply and agregate demand. b) Find the equilibrium level of Y and P. c) Graphically represent this economy. d) Find the long-run Y of this economy. e) What is the level of government expenses G, the government needs to impose in order to lead the economy to the full employment? (Show the long-run graphically).Assume an economy operates in the keynisian ( horizontal) ranges of its aggregate supply curve curve. For each of the following changes in condition, state the direction of the effect on : 1. Aggregate demand, 2 aggregate supply 3. Price level and 4. Real gdp A decrease in government expenditure in infrastructure A severe recession occurs in a country, which has been a major importer of the nations exports. The federal government reduces business taxes. The central bank increases the cash interest rate
- Suppose our economy is in macroeconomic equilibrium (also called "general equilibrium") with an upward-sloping aggregate supply curve and a downward-sloping aggregate demand curve. An increase in aggregate demand will: Question 5 options: a) Increase aggregate supply. b) Decrease the price level. c) Causes the aggregate supply to shift to the right. d) Increase real GDP. e) Reduce the number of discouraged workers in the unemployment rate.Due to an increase in consumer wealth, there is a $40 billion autonomous increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in both countries, and there are no taxes and no foreign trade, complete the accompanying tables to show the various rounds of increased spending that will occur in both economies if the marginal propensity to consume is 0.5 in Westlandia and 0.75 in Eastlandia. What do your results indicate about the relationship between the size of the marginal propensity to consume and the multiplier?The following graph shows an increase in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the right from AD1 to AD2, causing the quantity of output demanded to rise at all price levels. For example, at a price level of 140, output is now $400 billion, where previously it was $300 billion. 170 160 150 140 - 130 AD2 120 110 AD, 100 90 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars) The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to increase aggregate demand. Change Needed to Increase AD Wealth Taxes Interest rates The value of the domestic currency relative to the foreign currency PRICE LEVEL