Q11210810410001020304050607080OUTPUT (Billions of dollars)Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs morequickly. The policy will cause the natural rate of unemployment towhich will:O Shift the long-run aggregate supply curve to the leftO Shift the long-run aggregate supply curve to the rightO Not affect the long-run aggregate supply curveIn the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve.Direction of LRAS Curve ShiftMany workers leave to pursue more lucrative careers in foreign economies.A scientific breakthrough significantly increases food production per acre of farmland.A natural disaster destroys a significant amount of the economy's production facilities. Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which ofthe following? Check all that apply.O The size of the labor forceO The level of technological knowledgeThe price levelThe inflation rateSuppose the economy produces real GDP of $40 billion when unemployment is at its natural rate.Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph.132128LRAS124120116Q112 +PRICE LEVEL

In the long run output is produced at the natural rate of output.

Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force The level of technological knowledge O The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL

Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force The level of technological knowledge O The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 12P

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Suppose an economy is in long-run equilibrium. The centra bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply * Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O Nominal wages, prices, and perceptions adjust upward to this new price level. The government increases spending to increase aggregate demand. The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in th money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to nominal wages at…
3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.
"According to the aggregate demand and aggregate supply model, in the long run a decrease in consumption leads to" O an increase in real GDP but does not change inflation O increases in both inflation and real GDP a decrease in infiation but does not change real GDP an increase in inflation but does not change real GDP
Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. Price Level LRAS Aggregate Supply Aggregate Demand Quantity of Output Now adjust the graph to show the new long-run equilibrium. Aggregate Demand Aggregate Supply What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O The government increases taxes to curb aggregate demand. Nominal wages, prices, and perceptions adjust upward to this new price level. O The government increases spending to increase aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to…
This graph represents aggregate demand and aggregate supply with the economy in long-run equilibrium. PRICE LEVEL LRAS SRAS AD OUTPUT 6. Which of the following statements best explains the mechanism by which the economy will eventually return to long-run equilibrium after the decrease in transfer payments? Assume no other changes in government spending and taxation programs. O A. The reduction in the inflation rate due to the decrease in aggregate demand causes businesses to lower their expectations about the price level. This leads firms to produce more, shifting the short-run aggregate supply curve to the right, returning the economy to its natural rate of output. B. The reduction in the inflation rate due to the decrease in aggregate supply causes businesses to increase investment, shifting the aggregate demand curve to the right, returning the economy to its natural rate of output. C. The reduction in the inflation rate due to the increase in aggregate demand causes businesses to…
Draw a short-run aggregate supply curve. Label it. As we move up along the short-run aggregate supply curve, O A. potential GDP increases OB. the money wage rate, the prices of other resources, and potential GDP remain constant OC. the money wage rate and the prices of other resources change by the same percentage OD. the real wage rate, the prices of other resources, and potential GDP remain constant 150 140- 130- 120- 110- 100- Click the graph, choose a tool in the palette and follow the instructions to create your graph. 90- Price level (GDP deflator, 2009=100) 12.0 12.5 13.0 13.5 14.0 14.5 Real GDP (trillions of 2009 dollars) >>> Draw only the objects specified in the question. WX 11.5 trend rise in velocity. Evi
The observed correlation between the price level and real GDP may be low because O consumption is procyclical. O the central bank acts to target the price level. O money demand increases when the nominal interest rate rises. O money demand does not depend on income.
How does an increase in the price level affect the quantity of real GDP supplied in the long run? OA In the long run, an increase in the price level will increase real GDP OB In the long run, an increase in the price level decreases inflation, which will decrease real GDP OC. In the long run, an increase in the price level increases inflation, which will decrease real GDP OD. Changes in the price level do not affect the level of GDP in the long run. CIDS Price level (GDP deflator) 123 113- 103- Long-Run Aggregate Supply LRAS2 LRAS2 LRAS23 Real GDP (trillions of $)
Identify which curve on the previous graph corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose Not Shown. In the descriptions, AD represents aggregate demand; SRAS represents short-run aggregate supply; LRAS represents long-run aggregate supply. Description SRAS if the expected price level is 50 SRAS if the expected price level is 70 SRAS if the expected price level is 60 LRAS AD a O O O b O O O O O с O O O O O d O с O O Not Shown O O O O Suppose the economy is currently in short-run equilibrium at point L. In this case, the economy is producing at an output level potential output. At current prices and wage levels, real wages are what firms and workers expected when they agreed on wage curve to shift to the contracts. In the long run, if the price level and the nominal wage are both flexible, wages will, which will cause the . Assuming the other two curves do not change, the economy will reach a new equilibrium at an output of…
on Indicate whether the following factor will affect aggregate demand (AD) or aggregate supply (AS) and whether the effect would be an increase or a decrease. Then indicate what will happen to the price level and the level of Real GDP and what type of equilibrium will result assuming that the economy is initially in long-run equilibrium. a) A decrease in the nominal wage rate. b) A decrease in exports. c) A decrease in the exchange rate. d) The discovery of vast new oil field in AD no effect decrease + increase no effect AS increase no effect increase increase decrease decrease decrease Real GDP increase decrease increase increase Equilibrium recessionary gap ⇒ inflationary gap inflationary gap inflationary gap AP ? Q Fir
e 4 of 5) - Chromium https://elear IING SYSTEM (ACADEMIC) ples of Macroeconomics|| Spring21 Which of the following would shift the aggregate demand curve to the left? Select one: O a. an increase in exports O b. an increase in the money supply O C. an increase in government spending d. an increase in taxes e here to search hp
R The model of aggregate demand/aggregate supply... O Identifies the equilibrium GDP and price level as well as the gap between the equilibrium GDP and the potential GDP Identifies the potential GDP and price level as well as the gap between the price level and the inflation. O Identifies the equilibrium GDP the economy will reach in the long A run O Identifies the equilibrium quantity and price for consumer goods 10 % 5 T 6 O Y Com liji fa 887 & 7 7 U 8 4 f10 num lk. 8 ( 5 9 開