8. What are the four phases of the business cycle?а.b.с.d.A key question in macroeconomics is why the economy experiences business cycle fluctuationsrather than slow, smooth growth. The most prominent theory is that business cycle fluctuations arethe result of (flexible, sticky) prices interacting with economic shocks.Why does the business cycle affect output and employment in capital goods and consumer durablegoods industries more severely than in industries producing nondurables?

The ups and downs in the economy of the country is a result of business cycle.

Answered: c. d. A key question in macroeconomics…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hi, could you help me solve this problem? It is often argued that the effect of a demand shock depends on the state of the economy. In particular, a given increase in aggregate demand may induce a larger increase in inflation (or price level) if the output gap is initially positive (output exceeds natural output) than if the output gap is initially negative. The argument is that when economy’s overall production capacity is almost fully used, firms cannot expand output much in response to an increase in demand.t Draw AD and AS curves that are consistent with these ideas and explain them briefly.
Author claims, “The pandemic was unexpected shock. Climate change and climate policy are known shocks that can even more substantial impact on economic structures and macroeconomic stability.”Critically explain this statement by using AD-AS model.
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What is likely to be true at the trough of the business cycle? A. Real GDP, unemployment, and inflation are all likely to increase. B. Real GDP is increasing, unemployment is decreasing, and inflation is increasing. C. Real GDP, unemployment, and inflation are all likely to decrease. D. Real GDP is decreasing, unemployment is increasing, and inflation is steady or decreasing.
Y5 Consider an AS-AD model for the U.S. Suppose an economic expansion in Mexico increases income for the average Mexican household. Mexico is a large trading partner with the US. This expansion would cause: a. the U.S. price level to rise and real GDP to fall. b. the U.S. price level and real GDP to increase. c. the U.S. price level to fall and real GDP to rise. d. the U.S. price level and real GDP to fall.
12. Assume that an economy operates according to the sticky-wage model. The nominal wage was set to make labor supply and labor demand equal when the expected price level equaled 120 (as measured by the consumer price index). a. Use a graph of the labor market to illustrate what happens to the quantity of labor employed if the actual price level over the time period when wages are stuck equals 110. b. Use a graph of the production function to illustrate how the quantity of output produced changes if the actual price level equals 110 when the expected price level is 120. c. Given the unexpectedly low price level, will this economy be operating above, below, or at the natural rate?
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1. Suppose we observe that US economy is experiencing low unemployment (3%), faster-than-average real GDP growth (4%), and increasing inflation (rising from 2% to 4%). a. Draw the AS/AD graph for the kind of shock that would generate these symptoms, and give an example of how that kind of shock might happen. What kind of change in the economy leads to this kind of AS/AD graph? b. Briefly discuss what you see in the graph that corresponds to each of the symptoms. E.g. what part of the picturetells you we have low unemployment? b)Describe the two goals that the Federal Reserve is required to pursue with monetary policy. Given these two goals, what specific actions will the Fed take in reaction to the shock, and how will these affect real GDP in the short run? Be sure to explain how the proposed action helps achieve the Fed's goals.
Due to temporary weather patterns, suppose production in the agricultural sector increases. a. Given the various shifters presented in the book/lecture notes, which curve(s) shifts first and why? Show the graph of the Goods and Services market, including the shift. b. What happened to the price level and RGDP in the short-run? c. Will this cause a temporary business cycle? Why or why not? Show any additional shifts in the graph above.

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