Price Level P₁ 0 O O व AS₂ AS₁ B P3 and real output will be Q1. O P₁ and real output will be Q₁. O P2 and real output will be Q1. P2 and real output will be Q1. AD₁ Q3 Q₁ Q₂ Real Domestic Output AD ₂ Refer to the graph. Assume that the economy is initially at equilibrium at point A and the economy is at full employment. If there is an expansion in the economy and AD₁ shifts to AD2, and wages and prices are flexible, then in the long run the price level will be

Price Level P₁ 0 O O व AS₂ AS₁ B P3 and real output will be Q1. O P₁ and real output will be Q₁. O P2 and real output will be Q1. P2 and real output will be Q1. AD₁ Q3 Q₁ Q₂ Real Domestic Output AD ₂ Refer to the graph. Assume that the economy is initially at equilibrium at point A and the economy is at full employment. If there is an expansion in the economy and AD₁ shifts to AD2, and wages and prices are flexible, then in the long run the price level will be

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Aggregate expenditures and income The following table shows consumption (C), investment (1), government spending (G), and net exports (X-M) in a hypothetical economy for various levels of real GDP (Y). Assume that the price level remains unchanged at all levels of income. All figures are in billions of dollars. Compute aggregate expenditures for each income level and fill in the last column In the following table. Y с G 500 525 250 150 600 550 250 150 575 250 150 600 250 150 -200 900 625 250 150 -200 700 800 AL AGGREGATE EXPENDITURES (Billions of dollars) The following graph shows real GDP on the horizontal axis and aggregate expenditures (AE) on the vertical axis. The orange line (square symbols) represents a 45-degree (Y-AE) line. 1000 Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy. Line segments will automatically connect the points. 900 300 I 700 X-M Aggregate Expenditures -200 725 -200 750 775 800 825 600 500 + -200 AE line *+…
illustrates and how it is related to the aggregate demand curve. 3. Figure 11.8 shows the aggregate expenditure curve when the price level is 110. When the price level rises to 120, the AE curve shifts vertically downwards from AE, by $1 trillion. When the price level falls to 100, the AE curve shifts vertically upwards from AE, by $1 trillion. Figure 11.8: FIGURE 11.8 Short Answer Problem 10 (a) 8 Price level (GDP deflator) Aggregate planned expendit (trillions o FIGURE 11.9 Short Answer Problem 10 (b) 130 a. Draw two new AE curves in figure 11.8 for the price levels of 100 and 120. What are the equilibrium levels of aggregate expenditures for these two price levels? Label as 'b' the equilibrium point when the price level is 100 and 'c' as price level is 120. 120 b. Use figure 11.8 to obtain three points 'a', 'b' and 'c' on the aggregate demand curve. Plot these three points on figure 11.9. Assume that the aggregate demand curve is linear and draw the AD curve on figure 11.9. Figure…
Planned AE (PAE, trillion $) 45° AE = Y PAE₂= 7+0.5Y PAE = 5 +0.5Y PAE = 3 +0.5Y Actual AE (GDP, Y, trillion $) Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2 and the potential GDP is $10 trillion. Which of the following statements about this economy is false? O There is an inflationary output gap of $4 trillion. O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right The economy is in an expansion. O The economy produces more than spends.
LAS 100 90 X 80 70 110 60 0 320 360 below full-employment; 40 above full-employment; 20 below full-employment; 20 above full-employment; 40 actual; 0 SAS 400 440 480 520 Real GDP (billions of 2007 dollars) Figure 10.3.1 AD Refer to Figure 10.3.1. The economy is at its short-run macroeconomic equilibrium. There is a difference between equilibrium real GDP and potential GDP of $ billion.
PLEASE EXPLAIN IT
Which of the following is true? O An increase in aggregate demand is the same as a downward shift in the total expenditure function O An increase in aggregate demand is the same as an increase in aggregate supply O An inward shift of the aggregate demand curve is the same as an upward shift in the total expenditure function O An increase in aggregate demand is the same as an upward shift in the total expenditure function
Imagine a 45°-line (Keynesian cross) diagram in which the upward-sloping aggregate expenditure curve intersects the 45°-line at point A. The economy is currently in macroeconomic equilibrium at output level Y.. Suppose that the price level increases. If the price level increases, the aggregate expenditures line will shift down The new equilibrium levels of GDP and expenditures will be O A. where the new AE line intersects the 45°-line. O B. unchanged. OC. anywhere on the new AE line ⒸD. where the new AE line interesects the original AE line.
The slope of the aggregate expenditure line is always this slope equals the than 1. If there are no imports or taxes, O greater: marginal propensity to save O greater: marginal propensity to consume O less; marginal propensity to consume O less; marginal propensity to save
Moving to another question will save this response. Question 8 In an open mixed economy, the inflationary expenditure gap may be described as the O A. excess of GDP over Ca + lg +Xn +G at the full-employment output. O B. excess of Sa + M +T over lg +X+ G at the full-employment GDP. O C. excess of Ca + lg +Xn + G at the full-employment GDP. O D.extra consumption that occurs when investment increases in a full-employment economy. A Moving to another question will save this response.
Problem 1 The various expenditure categories within the economy are: C = 600+ 0.8Yd | = 800 G = 600 NX = 0 T= 700 Refer to problem 1. Equilibrium Real GDP is O 7200 O 4200 O 1800 O 5500
Price Level Price Level O A AS₁ B AS2 AD Real Domestic Output (A) AS AD₂ AD₁ Real Domestic Output (C) Price Level Price Level AS2 AS₁ AD Real Domestic Output (B) AS Which of the diagrams for the U.S. economy best portrays the effects of a substantial reduction in government spending? AD₁ AD₂ Real Domestic Output (D)