Chapter 20 Homework 1 Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 105. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 95, 100, 105, 110, and 115. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 10 20 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 AS LRAS The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the price

Chapter 20 Homework 1 Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 105. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 95, 100, 105, 110, and 115. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 10 20 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 AS LRAS The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the price

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter26: The Neoclassical Perspective

Section: Chapter Questions

Problem 21P: Use Table 26.3 to answer the following questions. Sketch an aggregate supply and aggregate demand...

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The following graph shows an increase in short-run aggregate supply (SRAS) in a hypothetical economy. Specifically, short-run aggregate supply shifts to the right from SRAS₁ to SRAS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. Review the graph and then complete the table that follows. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 50 SRAS SRAS₂ 100 150 200 250 300 350 400 REAL GDP (Billions of dollars) ? The following table lists several determinants of short-run aggregate supply. Complete the table by indicating the change needed in each determinant to increase short-run aggregate supply. Determinant Change Needed to Increase SRAS Input Prices increase or decrease Burdensome Regulations increase or decrease Technology decline or improvement
Use the following graph to answer the following questions. Line Y Price level (P) 100 80 B Line Z Line X2 Line X1 Real GDP (3) If point A occurs chronologically before point B, then this graph could represent a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply. a decrease in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in long-run aggregate supply. an increase in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in short-run aggregate supply.
Connect assignment O es Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph. Output Demanded (Aggregate Demand) Output Supplied (Aggregate Demand) Price Level 600 100 Price Level (average price) Instructions: Use the tools provided 'AD' and 'AS' to plot the aggregate demand (AD) and aggregate supply (AS) curves. Plot only the endpoints of each line (plot 2 points for each line-4 points total). Both curves are assumed to be straight lines. 900 800 700 600 500 400 300 200 100 0 0 $700 100 Aggregate Supply and Demand 200 $800 100 900 900 900 900 90 900 900 700 Real Output (quantity per year) Instructions: Enter your response as a whole number. a. What is the equilibrium price level? $ Tools AD D AS e b. What curve (AD or AS) would have shifted if a new equilibrium were to occur at an output level of 600 and a price level of $600? O AS would have shifted to the right. O AS would have shifted to the left. O AD would have…
On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120 125 120 115 110 PRICE LEVEL 88 S M 90 AS BO 75 a 10 20 30 42 50 60 70 OUTPUT (Billions of dollars) 60 100 ¢ AS LRAS ? The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level, level that people expected. the price
On the following graph, use the purple Mine (diamond symbol) plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange ne segments (square symbol) to plat the economy's shart-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120, PRICE LEVEL 116 110 105 100 80 75 0 + 10 20 30 40 90 70 OUTPUT (ons of dollars) 85 120 AS LRAS The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the price
6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output supplied by firms can deviate from the natural level of output if the actual price level deviates from the expected price level in the economy. A number of theories explain reasons why this might happen. For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 110. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will not change, and firms that rely on catalogs will respond by lowering the quantity of output they supply. If enough firms face high costs of…
Create a graph for a short-run aggregate supply curve. Use the variable ‘Price Level’ for the vertical axis and ‘Real GDP’ for the horizontal axis In your answer, explain why there is a direct relationship between the price level and real GDP. Use your graph to illustrate your explanation. Also, discuss determinants of Aggregate Supply or factors that shift Aggregate Supply curve. (200 to 300 words) .
Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown in the following table. Amount of Real GDP Demanded, Amount of Real GDP Supplied, Billions Price Level1 Billions (Price Index) $ 100 $ 200 $ 300 $ 400 $ 500 300 $ 450 250 400 200 300 150 200 100 100 a. Use the data above to graph the aggregate demand and aggregate supply curves. Instructions: (1) Use the tools provided 'AD' and 'AS' to draw the aggregate demand and aggregate supply curves (plot 5 points total for each curve). To earn full credit for this graph, you must plot all required points for each curve. (2) Use the tool provided 'Eq' to indicate the equilibrium price level and the equilibrium level of real output. 350 Tools 300 AD AS 250 200 Eq 150 100 50 100 200 300 400 500 600 700 Real domestic output (billions of dollars) Price level
Create a graph for a short-run aggregate supply curve. Use the variable ‘Price Level’ for the vertical axis and ‘Real GDP’ for the horizontal axis. Then explain why there is a direct relationship between the price level and real GDP. Use your graph to illustrate your explanation. Also, discuss determinants of Aggregate Supply or factors that shift Aggregate Supply curve.
owing graph plots aggregate demand (ADar) and aggregate supply (AS) for the imaginary country of Patagonia in the year 2027. the natural level of output in this economy is $6 trillion. following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. plete the table by entering the inflation rate at each potential outcome point. Calculate the inflation rate to two decimal points of precision. Unemployment Rate 3% 5% Inflation Rate LRAS AS AD ADE 12 14 16 OUTPUT (Trillions of dollars) 43 +1 Outcome C ists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will the curve labeled ADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate in 2028 will be given by the curve labeled ADg, resulting in the outcome given by point B. >wing table presents projections for the unemployment rates that would…
Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown in the following table. Amount of Amount of Real GDP Demanded, Real GDP Supplied, Billions Price Level Billions (Price Index) $100 300 $450 $200 250 400 $300 200 300 $400 150 200 $500 100 100 a. Use the data above to graph the aggregate demand and aggregate supply curves. Instructions: (1) Use the tools provided 'AD' and 'AS' to draw the aggregate demand and aggregate supply curves (plot 5 points total for each curve). To earn full credit for this graph, you must plot all required points for each curve. (2) Use the tool provided 'Eq' to indicate the equilibrium price level and the equilibrium level of real output. 350 Tools 300 AD AS 250 200 Eq 150 100 50 100 200 300 400 500 600 700 Real domestic output (billions of dollars) Instructions: Enter your answers as a whole number. a. What are the equilibrium price level and the equilibrium level of real output in this hypothetical…
On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120. PRICE LEVEL 125 120 115 + 110 105 100 95 90 85 80 75 0 10 20 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 0 AS LRAS ? The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the price