Rapid advances in technology greatly reduce production costs. Using the same amount of resources, firms can produce more output using new technologies. With the help of the aggregate demand – aggregate supply diagrams, briefly explain how technological advances may affect the equilibrium inflation rate and output in an economy in the short-run and in the long run.

Homework (Ch 20) Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The level of technological knowledge The quantity of physical capital The inflation rate The price level Suppose the economy produces real GDP of $60 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. (? 132 128 124 LRAS 18 Search

Inflation is increasingly becoming a concern among economists. One of the heads of Bank of America has predicted that consumer prices will increase by 8% by the end of 2021. Using the AD/SRAS/LRAS graph show how inflation will effect the AD curve. (Start the graph at the macroequilibrium point and show the changes)

Q2. If output falls, what is likely to happen to inflation and employment?

The country of Freeland has an aggregate demand curve determined by the equation M+v=6% Freeland also has a potential growth rate of 2%. Using this information, draw Freeland's aggregate demand (AD) and long-run aggregate supply (LRAS) curves on the graph. Inflation rate (%) 12 11 10 9 8 7 6 5 3 2 4 LRAS AD

What is the shape of the aggregate supply curve in the long run and in the short run? Explain the reasons why they are shaped that way.

Suppose that government decides to support the firms for their investments in research and the development.Assuming this support increases productivity in the economy, use aggregate demand and supply analysis to predict the short-run and long-run effects on inflation and output. Show these effects on a graph and explain the results in detail.

Briefly explain in a paragraph or two why you would rather be a borrower during a period of unexpected rising inflation, and a lender during a period of unexpected declining inflation.

Describe the mechanism by which demand creates its own supply.

Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run. a reduction in government purchases an increase in nominal wages a major improvement in technology imposing in tariff barriers to imports