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- Which of the following is a major difference between the AD-AS model and the dynamic AD-AS model? The dynamic AD-AS model assumes OA. AD only includes consumption, investment, and government purchases, while the AD-AS model assumes AD includes consumption, investment, government purchases and net exports. B. the SRAS is stable and will not shift, while the AD-AS model assumes the SRAS can only change with an exogenous event such as oil price changes. OC. the economy does not experience long-run growth, while the AD-AS model assumes there is constant inflation in the economy. OD. potential GDP increases continually, while the AD-AS model assumes the LRAS does not change.If real GDP is not close to potential GDP then_ then and if real GDP is close to or at potential GDP equilibrium occurs in the steep range of AS; equilibrium occurs in the flat range of AS equilibrium occurs in the steep range of AD; equilibrium occurs in the flat range of AD equilibrium occurs in the flat range of AS; equilibrium occurs in the steep range of ASIf aggregate demand is increased by 4500 and MPC is 0.75, what is the increase in Y?
- We again assume asimple closed economy with GDP of 100 and:c0(autonomous consumption) = 20c1 (marginal propensity to consume) = 0.6I (investment) = 20.a) Now assume that c0falls by 5 (i.e. 5% of GDP), i.e. for any given level of output,consumption will fall by 5. Show the implied fall in the AD function in yourdiagram and show that output will fall by more than 5.b) Show that the multiplier is equal to 2.5, and hence that, in the new equilibrium,output will have fallen by 12.5 (i.e. by 12.5%)c) How big would the impact be if, say, c1 = 0.4 or c1 = 0.8? Explain the difference.Investment spending rises by $200. Make a table showing the effect on I, C, and GDP for each of 3 rounds and the total effect after all possible rounds are completed if the MPC = 0.6 Use the table I present in my video lectures #1 and #2 as your guidefor format. Draw an AD/AS diagram showing the effect of the above on real GDP if we are far to the left of QN so the SRAS curve is flat. Be sure to include the numbers from the table on your diagram in their correct places. Start with AD0 and Q0, then show the effect of rounds 1 and 2 with AD1, Q1, AD2, and Q2. After you have done the first 2 rounds, skip ahead to showing the final AD curve and the final Q (ADF and QF). Remember to include the numerical distance covered from Q0 to QF on your diagram. I did this in video 2, so review that help you with this. Think carefully on whether the AD curve is shifting to the right or to the left. Remember, shifts to the right are increases and to the left are decreases.stion 21 of 22 > Identify whether each macroeconomic variable is an example of a withdrawal or an injection. Then, determine the value of investment at equilibrium. All values are in billions of dollars. Withdrawal saving = $720 imports = $2520 taxes = $2700 investment at equilibrium: $ 400 Answer Bank Injection government spending = $3600 exports = $1980 Attempt 1 investment = ? billion
- Why might it be important for policy makers to know which in zone of the SRAS curve the economy is?Which equation represents the macroeconomic equilibrium condition in the aggregate expenditure (AE) model?The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. Y* AS D 100 80 E 60 AD 650 700 800 1000 Real GDP Refer to the figure above. In the initial short-run equilibrium, there is but this gap could be closed by a output gap of a recessionary; 200; fiscal expansion. a recessionary; 100; fiscal contraction. an inflationary; 100; fiscal contraction O a recessionary; 200; fiscal contraction Price Level