Question 3 i) ii) iii) iv) v) Use the quantity theory of money to explain why increasing money supply need not result in inflation in an economy The nominal Gross Domestic Product of a country in the year 2015 is $25 billion. If the money supply in the economy is $20 billion, estimate the number of times money changed hands in this economy in 2015. Carefully explain why the aggregate demand curve slopes downwards from left to right Explain why planned expenditure may differ from actual expenditure in national income analysis. Use the aggregate demand and supply curves to explain stagflation O

Question 3 i) ii) iii) iv) v) Use the quantity theory of money to explain why increasing money supply need not result in inflation in an economy The nominal Gross Domestic Product of a country in the year 2015 is $25 billion. If the money supply in the economy is $20 billion, estimate the number of times money changed hands in this economy in 2015. Carefully explain why the aggregate demand curve slopes downwards from left to right Explain why planned expenditure may differ from actual expenditure in national income analysis. Use the aggregate demand and supply curves to explain stagflation O

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 42CTQ: On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because...

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Suppose the Federal Reserve begins to Increase the supply of money at an Increasing rate. What Impact would that have on GDP, unemployment, and inflation?
2. Why does the aggregate demand curve slope downward? The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL 160 150 140 130 120 110 100 90 80 Aggregate Demand Aggregate Demand 0 100 200 300 400 500 600 700 800 REAL GDP (Billions of dollars) Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply. A lower price level makes domestically produced goods less expensive than foreign goods. A higher price level decreases the real value of consumers' assets. A lower price level increases consumption through the income effect. As the aggregate price level rises, the cost of borrowing money will the quantity of output demanded to effect. causing This phenomenon is known as the
9. Which of the following will shift the aggregate demand curve to the right, ceteris paribus? A) an increase in interest rates B) a decrease in disposable income C) a decrease in expected profits for firms D) an increase in net exports 10. If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve? A) This will move the economy up along a stationary aggregate demand curve. B) This will move the economy down along a stationary aggregate demand curve. C) This will shift the aggregate demand curve to the left. D) This will shift the aggregate demand curve to the right
2. Why does the aggregate demand curve slope downward? The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL 140 150 140 130 120 110 100 90 8 BO 0 100 Aggregate Demand Aggregate Demand 600 200 300 400 500 REAL GDP (Billions of dollars) 700 800 ?
1. Which of the following statements is true about shifts in aggregate demand: a) Shifts to the right when government spending decreases when aggregate supply is positively skewed and there is an increase in the real unit cost of materials, ceteris paribus b) Shift to the left when the price level increases, ceteris paribus c) Shift to the left when taxes decrease, ceteris paribus d) Shifts to the right when the nominal money supply increases, ceteris paribus 2. The following is the background that prompted the government to carry out financial deregulation in the period 1983 – 1993, except * a) The decline in world crude oil prices b) Decrease in state revenue c) The need for large development funding d) All wrong
1. State whether each of the following transactions is a part of aggregate demand in the United States, and if so whether it is Consumption spending, Investment, Government purchase, Exports, or IMPORTS For example, "Dieter, a German resident, buys frozen chickens that were raised in the U.S." Answer: No, IMPORTS a) David buys a keyboard synthesizer made in the United States. b) A Japanese automaker buys stock in an American auto company. c) A Japanese automaker builds an assembly plant in Illinois. d) Will buys a compact disc player made in Japan. e) The U.S government sends an insurance check to Renee, an unemployed keypunch operator. f) Mark buys a three-year-old used car. g) The state government sends a salary check to Karen, an economics instructor at CUNY.
3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.
8. Which of the following explain why the Aggregate Demand curve is downward sloping? a) An increase in the price level decreases the purchasing power of money denominated wealth, which in turn causes a decline in on consumption spending. b) An increase in the price level decreases the purchasing power of money, which means that more money is needed to purchase goods. This causes buyers of investment and durable goods to require bigger loans to finance their purchases. This, in turn, causes an increase in the demand for loanable funds which leads to a higher interest rate. A higher interest rate will reduce the real purchases of investment and durable goods. c) An increase in the price level makes goods relatively more expensive to foreigners causing them to buy less which means that net exports will decline. d) All of the above. e) None of the above. 9. Which of the following explain why the Aggregate Supply curve is upward sloping?…
5 Which of the following is not a reason for the increase in aggregate demand? a. Decrease in imports b. Increase in government expenditure c. Increase in consumption d. None of the options Clear my choice
Price level (GDP deflator, 2009 = 100) I 130 120 110 100 8 0 16 LAS SAS ADO AD2 AD₁ 17 18 19 20 21 Real GDP (trillions of 2009 dollars) O increase government expenditures. In the above figure, the economy experiences an increase in aggregate demand so that the aggregate demand curve shifts from ADO to AD2. If the Fed wants to offset this change, it would O purchase government securities on the open market. sell government securities on the open market. raise taxes.