Need help with this. Thanks! Economists disagree about how quickly the economy adjusts to an aggregate demand shock. In the view of some economists, people form expectationsbased on present realities and change expectations gradually as their experience unfolds. Such expectations are said to beadaptive/ rational/ unexpected/ great/ reasonableThe following graph shows the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves for ahypothetical economy that is initially in equilibrium, operating at potential output at point N.PRICE LEVEL11010629440LRASSRASMDSRASAD₁AD₂444852QUANTITY OF OUTPUT (Trillions of dollars)56(?) Suppose an unanticipated increase in investment spending causes the aggregate demand curve to shift to the right (from AD1₁ to AD₂). According toadherents of the adaptive-expectations theory, the unanticipated change in aggregate demand will cause the economy to move in which direction?O From point N to point K, before returning to point NO From point N to point D and, eventually, from point D to point ZO Directly from point N to point ZO From point N to point D, before returning to point NNow suppose that the increase in investment spending was entirely anticipated by firms and workers. This means the public fully anticipates the rightwardshift of the aggregate demand curve (from AD₁ to AD₂). According to rational-expectations adherents, the anticipated change in aggregate demand willcause the economy to move in which direction?O From point N to point K, before returning to point NDirectly from point N to point ZO From point N to point D, before returning to point NO From point N to point D and, eventually, from point D to point Z

Aggregate demand is the total quantity of output firms will produce and sell at the end of the day,…

Economists disagree about how quickly the economy adjusts to an aggregate demand shock. In the view of some economists, people form expectations based on present realities and change expectations gradually as their experience unfolds. Such expectations are said to be adaptive/ rational/ unexpected/ great/ reasonable The following graph shows the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves for a hypothetical economy that is initially in equilibrium, operating at potential output at point N. PRICE LEVEL 110 106 98 94 40 LRAS SN SRAS SRAS AD₁ AD₂ 44 48 52 QUANTITY OF OUTPUT (Trillions of dollars) 56 ?

Economists disagree about how quickly the economy adjusts to an aggregate demand shock. In the view of some economists, people form expectations based on present realities and change expectations gradually as their experience unfolds. Such expectations are said to be adaptive/ rational/ unexpected/ great/ reasonable The following graph shows the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves for a hypothetical economy that is initially in equilibrium, operating at potential output at point N. PRICE LEVEL 110 106 98 94 40 LRAS SN SRAS SRAS AD₁ AD₂ 44 48 52 QUANTITY OF OUTPUT (Trillions of dollars) 56 ?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter20: Aggregate Demand And Supply

Section: Chapter Questions

Problem 3SQP

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In 2019, before the Covid-19 pandemic began affecting the U.S. economy, Nouriel Roubini of New York University identified "three negative supply shocks that could trigger a global recession by 2020." What is a negative supply shock? OA. Any event that causes consumers to unexpectedly increase their consumption, shifting aggregate supply to the left OB. An event that causes an unexpected change in production costs or technology, shifting short-run aggregate supply to the left OC. An event that causes an unexpected change in production costs or technology, shifting long-run aggregate supply to the left OD. Any event that causes firms to sell more goods than they can produce, shifting aggregate supply to the left
What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant. a. The expectation of rapid inflation b. A 10 percent reduction in personal income tax rates c. A sizable increase in labor productivity (with no change in nominal wages) d. A 12 percent increase in nominal wages (with no change in productivity) e. Depreciation in the international value of the dollar.
Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expectedeffects on the equilibrium price level and the level ofreal output.a. A reduction in the economy’s real interest rate.b. A major increase in federal spending for healthcare (with no increase in taxes).c. The complete disintegration of OPEC, causing oilprices to fall by one-half. d. A 10 percent reduction in personal income taxrates (with no change in government spending).e. A sizable increase in labor productivity (with nochange in nominal wages).f. A 12 percent increase in nominal wages (with nochange in productivity).g. A sizable depreciation in the international value ofthe dollar.
If the economy has rational expectations and the model is sticky price model. Could you explain why the following statement true in macroeconomics?
The figure above shows the Aggregate Supply (AS) and Aggregate Demand (AD) curves for an economy that is currently at equilibrium producing Y0 units of output. What would be the result of a positive shock to AS if there is no change to AD? Question 12Select one or more: a. lower output levels b. higher price levels c. lower price levels d. higher output levels
What effects would each of the following have on aggregate demand or each case use a diagram to show the expected effects on the equilibrium price level and level of real output. Assume that all other things remain constant. aggregate supply? In a. A widespread fear of depression on the part of consumers. AD curve (right, left), output (up, down) and price level (up, down) (assuming no ratchet effect). b. The expectation of rapid inflation. AD curve (right, left), output (up, down) and price level (up, down). с. A sizable increase in labor productivity (with no change in nominal wages). AS curve (right, left), output (up, down) and price level (up, down). d. Depreciation in the international value of the dollar. AD curve (right, left) (increased net exports); AS curve (right, left) (higher input prices)
Suppose the economy is in a situation of moderate unemployment, and then an exogenous increase of aggregate demand occurs. (Assume the aggregate demand schedule follows the pattern set out by the mainstream story.) Use short run aggregate supply and aggregate demand analysis to discuss in detail the effects of this demand change on the price level and real GDP in the short run. Explain how the situation could change in the long run after the happenings in the first part.
Which of the following help to explain why the aggregate demand curve slopes downward? a. When the domestic price level rises, our goods and services become more expensive to foreigners. b. When government spending rises, the price falls. c. There is an inverse relationship between consumer expectations and personal taxes. d. When the price level rises, the real value of financial assets (like stocks, bonds, and savings account balances) declines. Label each of the following descriptions as being either an immediate-short-run aggregate supply curve, a short-run aggregate supply curve, or a long-run aggregagte supply curve. a. A vertical line b. The price level is fixed c. Output prices are flexible, but input prices are fixed d. A horizontal line e. An upsloping curve f. Output is fixed What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case, use a diagram to show the expected effects on the equilibrium price level…
The figure above shows the Aggregate Supply (AS) and Aggregate Demand (AD) curves for an economy that is currently at equilibrium producing Y0 units of output. What would be the result of a negative shock to AD if there is no change to AS? Question 13Select one or more: a. Decrease in output b. Increase in price levels c. Decrease in price levels d. Increase in output
2 3.2. What is aggregate demand? Fill in the blanks to complete the sentence below. supply. Drag word(s) below to fill in the blank(s) in the passage. The initial temporary lockdown that occurred in March 2020 would be described as a(n) shock, which led to an increase in firms' production costs, causing a(n) in aggregate ܀ exogenous demand increase + decrease endogenous supply
What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant.a. A widespread fear of depression on the part of consumers.b. A $2 increase in the excise tax on a pack of cigarettes.c. A reduction in interest rates at each price level.d. A major increase in Federal spending for health care.e. The expectation of rapid inflation.f. The complete disintegration of OPEC, causing oil prices to fall by one-half.g. A 10 percent reduction in personal income tax rates.h. A sizable increase in labor productivity (with no change in nominal wages).i. A 12 percent increase in nominal wages (with no change in productivity).j. Depreciation in the international value of the dollar.
Aggregate Demand and Aggregate Supply - End of Chapter Problems 10. There were two major shocks to the U.S. economy in 2007, leading to the severe recession of 2007-2009. One shock was related to oil prices; the other was the slump in the housing market. In the accompanying graph, shift the AD and/or SRAS curves and move the equilibrium point to its new position to show the effects of the following two shocks on GDP in the AD-AS framework. a. Data taken from the Department of Energy indicate that the average price of crude oil in the world increased from $54.63 per barrel on Jan. 5, 2007, to $92.93 on Dec. 28, 2007. b. The Housing Price Index, published by the Office of Federal Housing Enterprise Oversight, calculates that U.S. home prices fell by an average of 3% in the 12 months between January 2007 and January 2008. c. As a result of the two shocks, real GDP decreased price level increased , whereas the aggregate Aggregate price level Incorrect E [1] Real GDP SRAS AD