Consider the figure to the right. Suppose that businesses in this nation initially had been exporting significant amounts of domestically produced goods and services abroad Assume that other nations of the world have experienced a sudden decline in economic conditions. What happens to the nation's aggregate demand curve? In the short run, will the nation experience an inflationary gap or a recessionary gap? Explain 1) Using the line drawing tool, draw a new AD curve that shows the effects of a sudden decline in economic conditions in other nations Label your line AD, 2) Using the point drawing tool. Indicate the economy's new short-run equilibrium price and level of real GDP Label this point E₂ Carefully follow the instructions above, and only draw the required objects In the short run, the equilibrium price level will and the nation will experience gap because the short-run equilibrium level of real GDP per year is real GDP at full employment Price Level * LRAS, Real GDP per Year (Svilions) AS, AD₁

Consider the figure to the right. Suppose that businesses in this nation initially had been exporting significant amounts of domestically produced goods and services abroad Assume that other nations of the world have experienced a sudden decline in economic conditions. What happens to the nation's aggregate demand curve? In the short run, will the nation experience an inflationary gap or a recessionary gap? Explain 1) Using the line drawing tool, draw a new AD curve that shows the effects of a sudden decline in economic conditions in other nations Label your line AD, 2) Using the point drawing tool. Indicate the economy's new short-run equilibrium price and level of real GDP Label this point E₂ Carefully follow the instructions above, and only draw the required objects In the short run, the equilibrium price level will and the nation will experience gap because the short-run equilibrium level of real GDP per year is real GDP at full employment Price Level * LRAS, Real GDP per Year (Svilions) AS, AD₁

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Look at Figure 2. Assume this aggregate demand diagram represents an economy with government, where: a = exogenous consumption b = the marginal propensity to consume t = the tax rate |= investment G = government spending Y = income Figure 2 Aggregate demand AD, AD. 45° Income What is the equation for the aggregate demand schedule ADo? Select one: O ADO = b+ a(1 - t)G +1+ Y O ADO = a + b(1 – 1)Y + 1+ G O ADO = a + b(1 - t) I+ Y+ G O ADO = b+ a(1 – 1)Y + /+ G Next page > ( Previous page PHILIPS
What effects would each of the following have on aggregate demandor aggregate supply, other things equal? In each case explain the expectedeffects on the equilibrium price level and the level of real output, assumingthat the price level is flexible both upward and downward.· A sizable increase in labor productivity (with no change innominal wages).· An increase in exports that exceeds an increase in imports (notdue to tariffs).
2. Find an article in a major business publication, (for example, the Wall Street Journal, Barron's, the Harvard Business Review, Forbes) that describes an event that may affect the U.S. price level and real GDP. • Draw an initial set of AD and AS curves and determine which curve(s) will be affected and in which direction it will shift as a result of the AD/AS factors or policies. What are the factors or policies? Predict what will happen to price level and real GDP and explain your answer. All graphs must be properly labelled. Each axis must be correctly labelled, and the horizontal axis must indicate the nature of the graph itself.
What effects would each of the following have on aggregate demandor aggregate supply, other things equal? In each case explain the expectedeffects on the equilibrium price level and the level of real output, assumingthat the price level is flexible both upward and downward. · A reduction in interest rates at each price level.· A major increase in spending for health care by the Federalgovernment.· A 10 percent across-the-board reduction in personal income taxrates.· A sizable increase in labor productivity (with no change innominal wages).· An increase in exports that exceeds an increase in imports (notdue to tariffs).
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