Suppose that the economy is at full employment, the price level is 100, and the multiplier is 3. Investment increases by $100 billion. What is the immediate change in the quantity of real GDP demanded? Use the graph to answer this question. Draw the new AD curve. Label it. Draw a point to show the immediate change in the quantity of real GDP demanded. Label it 1. In the short run, does real GDP increase by more than, less than, or the same amount as the immediate change in the quantity of real GDP demanded? Answer by drawing a point at the new short-run macroeconomic equilibrium. Label it 2. 150- 140 130- 120- 110- 100- 90- 80- Price level (GDP deflator, 2009 = 100) LAS 100 70+ 700 ADO SAS 1000 800 900 1000 1100 1200 1300 1400 1500 D-LORD /billiams ofn dalla

Suppose that the economy is at full employment, the price level is 100, and the multiplier is 3. Investment increases by $100 billion. What is the immediate change in the quantity of real GDP demanded? Use the graph to answer this question. Draw the new AD curve. Label it. Draw a point to show the immediate change in the quantity of real GDP demanded. Label it 1. In the short run, does real GDP increase by more than, less than, or the same amount as the immediate change in the quantity of real GDP demanded? Answer by drawing a point at the new short-run macroeconomic equilibrium. Label it 2. 150- 140 130- 120- 110- 100- 90- 80- Price level (GDP deflator, 2009 = 100) LAS 100 70+ 700 ADO SAS 1000 800 900 1000 1100 1200 1300 1400 1500 D-LORD /billiams ofn dalla

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Aggregate Demand And Supply

Section: Chapter Questions

Problem 2SQ

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Similar questions

An increase in consumer spending causes the ["", ""] curve to shift to the ["", ""] .
Using an AD-AS diagram, explain what happens if personal income taxes increase.
The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion. The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change needed to decrease AD Wealth (increase/ decrease) Taxes (increase/ decrease) Expected rate of return on investment (increase/ decrease) Incomes in other countries (increase/ decrease)
"The demand curves for all products have negative slopes. For instance, the demand curves for milk,automobiles, personal computers, and shirts all have negative slopes. Therefore, because the aggregate demand curve shows the demand for all products, it too must have a negative slope. " Comment on this assertion.
The graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE2. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE3. 16 14- 12- 10- 10 Aggregate expenditure (trillions of 2009 dollars) A 45 degree line 11 12 13 14 Real GDP (trillions of 2009 dollars) Click the graph, choose a tool in the palette and follow the instructions to create your graph. 15 AE 16 17
Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves. Assume the central bank in this economy (the Fed) fixes the quantity of money supplied. Suppose the price level decreases from 150 to 125. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. Money Supply 15 12 4 Money Demand 3 5 10 15 20 MONEY (Billions of dollars) INTEREST RATE (Percent) 18 0 0 25 30 Money Demand Money Supply (?) Following the price level decrease, the quantity of money demanded at the initial interest rate of 9% will be supplied by the Fed at this interest rate. As a result, individuals will attempt to bonds and other interest-bearing assets, and bond issuers will realize that they restored in the money market at an interest rate of than the quantity of money their money holdings. In order to do so, they will interest rates until equilibrium is
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If the price level increases, what happens to the consumption function? Why?
The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for the United States in 1941. Shift one of the curves on the following graph to illustrate the effect of increased U.S. government spending during World War II.
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The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of output demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of output demanded rises to $500 billion. 170 100 180 140 130 120 110 AD 100 00 100 200 300 400 B00 700 OUTPUT (Billians of dollars) As the price level falls, the cost of borrowing money will , causing the quantity of output demanded to Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore and the number of foreign products purchased by domestic consumers and firms (imports) will Net exports will therefore causing the quantity of domestic output demanded to
The following graph shows an economy's short-run aggregate supply curve (SRAS), current equilibrium aggregate price level (P₁), and real GDP ( Q₁). The economy currently has Natural Real GDP (QN) of $8 trillion. Use this information to place the orange long-run aggregate supply curve (LRAS, square symbols) in the correct position on the graph. PRICE LEVEL 10 P₁ 8 4 2 0 0 A 기 4 6 8 10 REAL GDP (Trillions of dollars) 2 The equilibrium A₁, shifting SRAS SRAS 12 14 own on the graph, reveals that re GDP (Q₁) is LRAS ? Natural Re GDP. As a result, wages will over time,