Consider the economy represented by the aggregate supply-aggregate demandgraph below, which is initially at a short-run equilibrium at point A. Suppose taxesincrease. How would this affect the economy?Price level.(GDP deflator,2009 = 100)p1LRAS1GDP*AGDP1SRAS1Real GDP (trillions of 2009 dollars)Economic growth will decrease.Inflation will increase.Unemployment will decrease.Employment will increase.AD1

The correct answer is that economic growth will decrease as a result of the tax increase. To see the…

Answered: Consider the economy represented by the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the economy depicted in the graph below is self-correcting, then: LRAS Price SRAS Level C AD Real GDP SRAS will shift leftward and the economy will move to a new equilibrium at point B. AD will shift leftward and the economy will move to a new equilibrium at point C. SRAS will shift rightward and the economy will move to a new equilibrium at point C. AD will shift rightward and the economy will move to a new equilibrium at point B.
If membership falls in labor unions and unions become less popular, then: production costs will increase, SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level. production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level. production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level. production costs will fall, there will be a downward movement along SRAS, equilibrium GDP will increase and aggregate price level will fall.
Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, a shift in neither curve, or a shift in both curves. If a shift is caused, indicate which curve shifts, and in which direction it shifts. What happens to aggregate output and the price level in each case? The price level changes. Consumer confidence increases. The supply of resources decreases.
Inflationary GDP is the amount by which equilibrium real GDP falls short of the full employment level of GDP. True or False
Real aggregate expenditure, AE (trillions of dollars) 0 45° Y=AE AE Real GDP, Y (trillions of dollars) Refer to Figure 23-1. If the economy is at point L, what will happen? Inventories have fallen below their desired level, and firms decrease production. Inventories have risen above their desired level, and firms decrease production. Inventories have fallen below their desired level, and firms increase production. Inventories have risen above their desired level, and firms increase production.
Suppose there is an increase in the cost of health insurance premiums paid by employers as part of employees' compensation. Use the AD/SRAS diagram to predict the impact of these higher costs on the equilibrium price level and the level of real GDP. The price level rises and real GDP falls. The price level and real GDP both rise. The price level and real GDP both fall. The price level falls and real GDP rises.
In the first quarter of 2020, US real GDP declined about 9%, due to the economics shocks from the Covid 19 virus. If prices were completely flexible, and this means all prices, both inputs (such as labor), as well as output prices, what would you think would have been the drop in GDP? If prices are completely fixed, would the drop in GDP be greater or less than the flexible case? Why? If the Expenditure method of accounting for GDP, has to equal the Income Side, and the economy overproduces a particular item, say automobiles, the income side will also be higher, workers will buy the extra cars with extra income and the economy can gyrate indefinitely higher? Why or why not?
Suppose an economy is initially in equilibrium at point m. The economy is likely to move to equilibrium at point k as a result of: Price Level LRAS SRAS2 (P) SRAS: k P2 P: m AD: Q: QN Real GDP (Q) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a decrease in consumer confidence. b an increase in personal income taxes. a decrease in the wage rate, d. an adverse (negative) supply shock.
An increase in government spending would affect GDP if ? the long-run aggregate supply is vertical the short-run aggregate supply is vertical the short-run aggregate supply is upward sloping the short-run aggregate supply is horizontal
A movement along the economy's AS curve could be caused by a change in technology. the price level, caused in turn by an AD shock. the wage rate. labour productivity. the cost of capital
1. Key facts about economic fluctuations The graph included below approximates United States business cycles between quarter one of 1947 and quarter three of 1951. The shaded region denotes periods of six or more consecutive months of declining real gross domestic product (real GDP). REAL GDP (Billions of dollars) 2170 2070 1970 1870 1770 1947 1948 1949 YEAR 1950 1951 ?
Which of the following would shift aggregate demand to the left? Choose all that apply. Group of answer choices Increasing imports. Increasing taxes. Increasing consumer confidence. Increasing exports.

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