Suppose the economy experiences a "supply shock" due to a fall in oil prices. As a result, the economy experiences a/an ___________in the price level and a/an _______in the level of output(GDP) Group of answer choices Decrease; decrease Increase; increase Decrease; increase Increase; decreas
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- Economic On April 27, 2023, the U.S. Bureau of Economic Analysis (BEA) released the data on GDP growth for the US economy for the first quarter of 2023 and revealed that the economy grew sluggishly by only 1.1 percent. Based on this report, suppose the U.S. consumers and businesses start to become pessimistic about the direction of the economy and eventually cut consumer and business spending, analyze using the IS-LM and AD-AS frameworks the short and long-run effects of such a shock on prices, output, and real interest rate.From the information below calculate aggregate demand; Consumption (C) = $200 + 0.6Y Investment (I) = $300 Government (G) = $100 Net Export (NX) = $50 Which one of the following statements about Consumption and Aggregate Demand is CORRECT when the economy achieves equilibrium GDP? a. One is 350 greater than the other b. One comprises the other c. They are valued at $1025 and $1375, respectively d. They are valued at $1375 and $1025, respectively e. They are both the sameName two macroeconomic variables that decline when the economy goes into a recession. Name one macroeconomic variable that rises during a recession.
- Specify the supply determinants of real GDP. List the factors of each category and explain in detail.Explain, in detail, how the adjustment to macroeconomic equilibrium occurs when spending is less than production. Be sure to discuss how inventories play a crucial role in the adjustment process. State what happens to GDP and employment during the adjustment process.Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?
- Consider that the macroeconomy is hit by aftershocks. Exports decrease by $40 billion and imports increase by $200 billion. Modify your macroeconomic model to reflect both these aftershocks 1. At GDP of 7400: 1. Inventories are in surplus by 80 2. Inventories are in shortage by 80 3. Equilibrium is achieved by the macroeconomy according to the Keynesians 4. Inventories are in surplus by 240 2. At GDP of 8200: Inventories are in surplus by 320, Inventories are in shortage by 320, Equilibrium is achieved by the macroeconomy according to the Keynesians, or Inventories are both in surplus and shortage by 240 3. At GDP of 5000: Inventories are in surplus by 80, Inventories are in shortage by 80, Equilibrium is achieved by the macroeconomy according to the Keynesians, or Inventories are in surplus by 240 4. At GDP of 5800, exports are: 5. At GDP of 9000, imports are: 6. At the new equilibrium GDP, the economy is in: 7. The marginal propensity to consume (MPC) for your…The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion. The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change needed to decrease AD Wealth (increase/ decrease) Taxes (increase/ decrease) Expected rate of return on investment (increase/ decrease) Incomes in other countries (increase/ decrease)Income and consumption changes for five people are shown in the table. Given this information, rank the marginal propensities to consume (MPC) for the five people from largest to smallest. Largest MPC to Smallest MPC Answer Bank Colin Barry Al Dan Ernest Name Income change Consumption change Al +$10,000+$10,000 +$6,000+$6,000 Barry +$5,000+$5,000 +$1,600+$1,600 Colin +$2,000+$2,000 +$1,600+$1,600 Dan −$5,000−$5,000 −$3,500−$3,500 Ernest −$10,000−$10,000 −$4,000−$4,000
- Consider the table on the right, which shows business investment in inventories for each quarter from the first quarter of 2007 to the first quarter of 2012, measured in millions of 2007 dollars. Provide a macroeconomic explanation for this pattern. (Hint: When did the recession during this period begin and end?) The negative growth of inventories indicates a period of OA. inflation since inventories needed to be reduced in the face of increasing storage cost OB. recession because demand was met by drawing down past inventories and production did not increase. OC. recovery since inventories needed to be used to meet demand. OD. recession because inventories increased due to lack of demand Year 2007 2008 2009 2010 2011 2012 2013 Quarter Q1 308889 Q2 Q3 Q4 R288828 Q1 Q2 Q3 Q4 Q1 228892889 Q2 Q3 Q4 Q1 Q2 Inventory Investment (millions of 2007 dollars) $3360 - 2822 15,570 19,644 6061 9512 11,856 4699 -2364 7779 -4807 - 4807 2663 2508 4841 -6805 8965 12,153 6462 2179 2061 7298 14,091 3875…Determinants of aggregate demand The following graph shows an increase in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, 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.An economy is currently in equilibrium. The following figures refer to elements in its national income accounts. Elements £ bilions Consumption (total) 70 Investment Government Expenditure 7 Imports 10 Exports 8 Table 2 A) What is the current equilibrium level of income? B) What is the level of injections? What is the level of withdrawals? C) If national income now rises by £12 billion, and as a result, the consumption of domestically produced goods rises to £68 billion. Calculate the marginal propensity to consume (MPC). D) What is the value of the multiplier? E) Comment on the results in part (c) and (d).