Nominal GDP in this economy is trillion. If the velocity of money is 2, the money supply in this economy is Shift the AD curve on the previous graph to show the effects of a decrease in the money supply. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Based on the new price level, the new money supply must be trillion in the long run if the velocity of money remains at 2. Because the percentage decrease in the price level is the percentage decrease in the money supply. This illustrates the

Nominal GDP in this economy is trillion. If the velocity of money is 2, the money supply in this economy is Shift the AD curve on the previous graph to show the effects of a decrease in the money supply. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Based on the new price level, the new money supply must be trillion in the long run if the velocity of money remains at 2. Because the percentage decrease in the price level is the percentage decrease in the money supply. This illustrates the

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 52CTQ: If foreign wealth-holders decide that the United States is the safest place to invest their savings,...

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The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL (CPI) 160 150 140 130 120 110 100 90 80 0 Aggregate Demand 100 200 300 400 500 REAL GDP (Billions of dollars) 600 700 800 ? Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply. A higher price level makes domestically produced goods more expensive than foreign goods. A lower price level leads to a lower interest rate. A lower price level increases the consumption of complementary goods. As the aggregate price level rises, the purchasing power of households' saving balances will demanded to This phenomenon is known as the effect. , causing the quantity of output
The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $4 trillion. The curves are labelled a, b, c, and d. Three points on the graph are also indicated by grey stars and labelled X, Y, and Z. PRICE LEVEL 160 150 140 130 120 110 100 90 80 0 с 1 d a 2 3 5 REAL GDP (Trillions of dollars) 6 7 b ? Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the graph, choose Not Shown.
QUESTION 26 Figure 34-2. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs. "2 "1 MS -MD 2 -MD₁ 1 P2 P₁ 1₂2 1₁ AD Refer to Figure 34-2. If the graphs apply to an economy such as the U.S. economy, then the slope of the AD curve is primarily attributable to the a. interest-rate effect. b. Fisher effect. c. exchange-rate effect. d. wealth effect.
Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship: P=A×MP=A×M • P=Price LevelP=Price Level • M=Money SupplyM=Money Supply • A=A composite of other factors, including real GDP, that change very slowly over time.A=A composite of other factors, including real GDP, that change very slowly over time. How might an economist gather empirical data to test the proposed relationship between money and the price level?
The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS, to AS₂, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 50 AS, AS 100 150 200 250 300 350 400 QUANTITY OF OUTPUT The following table lists several determinants of short-run aggregate supply. Regulations on the firm Human capital Inflation expectations Complete the table by selecting the changes in each scenario necessary to increase short-run aggregate supply. Change Necessary to Increase AS
If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.
REAL GDP (Billions of dollars) 2700 2600 2500 2400 2300 v 1956 1953 1954 1955 YEAR 1957 ?
The following graph shows a decrease in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the left from ASi to AS2, causing the quantity of output supplied at a price level of 100 to fall from $200 billion to $150 billion. (? 200 AS2 175 150 125 100 75 50 25 50 100 150 200 250 300 350 400 QUANTITY OF OUTPUT PRICE LEVEL
The following graph shows a decrease in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the left from AS1 to AS2, causing the quantity of output supplied at a price level of 100 to fall from $200 billion to $150 billion. 200 AS, 2. 175 AS 150 125 100 75 50 25 50 100 150 200 250 300 350 400 QUANTITY OF OUTPUT The following table lists several determinants of short-run aggregate supply. Fill in the table by indicating the changes in the determinants necessary to decrease short-run aggregate supply. Change Needed to Decrease AS Inflation expectations Human capital Technology PRICE LEVEL
Q₁ Which of the following statements about the economic environment of a country are likely indicators 9 that the economy is hyperinflationary? Select one or more correct options and select Submit. Interest rates, wages and prices are linked to a price index. The general population attempts to keep the amount of local currency held at a minimum either through investing in non-monetary assets or, where possible, converting their local currency into the currency of a country with a stable economy. An increase in the number of strikes by members of a labour union. Sales and purchases on credit are priced to compensate for the expected loss in value during the credit period. The cumulative inflation rate over three years is approaching 80%. Submit
answer c and d Suppose that the following system of equations describe the macroeconomy of a hypothetical country: Y= C(y)+I(i)+G : IS or goods market M/p=L(i,y) : LM or money market b) Taking money supply and government expenditure as exogenous and the price level as fixed, determine and provide economic intuition for the signs and magnitudes of the following multipliers dY/dG and di/dG c) For a simultaneous increase in both the interest elasticity of investment and interest elasticity demand for money parameters, determine the net effect on the values of the multipliers in part b). d) For a horizontal LM curve, determine the numerical values of your answers in part b) above if: Marginal propensity to consume=5/6 Tax rate=0.25 Interest elasticity of investment=5 Interest elasticity of demand for money=50 Income elasticity of demand for money=2 answer c and d only
The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. PRICE LEVEL (CPI) 130 AS 125 120 115 110 AD1 105 100 95 90 90 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5 12.0 REAL GDP (Trillions of dollars) AD2 Macro Eq 2 ? Suppose the level of real GDP supplied by firms is $9 trillion and the price level is 100. In this case, the quantity of real GDP supplied is the real GDP demanded at a price level of 100, and firms will experience an unplanned in inventories. Firms will respond to the change in inventories by producing output until the economy reaches macroeconomic equilibrium at a price level of and real GDP of Suppose consumers and businesses become more optimistic about future economic conditions, causing the aggregate demand curve to increase by $1.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (AD 2). Be sure that AD2 is parallel…