Suppose we start with a general equilibrium, and there is a decrease in the effective tax rate on capital. What is the short-term effect of this shock?  1. real interest rate rises, and output rises 2. real interest rate rises, and output drops 3. real interest drops, and output rises  4. real interest rate drops, and output drops  5. None of the above

The following events have occurred at times in the history of the United States: 1. The world economy goes into an expansion. 2. U.S. businesses expect future profits to rise. 3. The government increases its expenditure on goods and services in a time of war or increased international tension. Explain the combined effects of these events on U.S. real GDP and the price level, starting from a position of long-run equilibrium. The graph shows an economy in long-run equilibrium. The world economy goes into an expansion, U.S. businesses expect future profits to rise, and the government increases its expenditure on goods and services in a time of war or increased international tension. Draw one new curve that shows the combined effect of the three events. Label it. Draw a point at the new short-run macroeconomic equilibrium. 140- 130- Price level (GDP deflator, 2012=100) 120- 110- 100- 90- 80- 18.0 LAS SAS AD G 19.0 20.0 21.0 Real GDP (trillions of 2012 dollars) Denonh: the ohiarte conciliad…

1. The long-run aggregate supply curve reflects the amount of potential production when we are in full employment.Answer: True False 2. Long-term macroeconomic equilibrium occurs when short-term aggregate supply intercepts aggregate demand and long-term aggregate supply at the same point.Answer: True False 3. An economic cycle is the periodic but irregular movement of ups and downs in production; and is measured by fluctuations in nominal GDP.Answer: True False

What kind of economic shock does the following statements represent? Short-term effects of rising household saving in response to RRSP and RRIFs tax-saving provisions: choose from: affect only long-run aggregate supply, positive aggregate demand shock, negative aggregate supply shock, negative aggregate demand shock, positive aggregate supply shock More Canadians vacation at home (Canada): choose from: negative aggregate supply shock, changes both short-run and long-run aggregate supply, positive aggregate supply shock, negative aggregate demand shock, changes long-run aggregate supply, positive aggregate demand shock Businesses face high commodity (input) prices: choose from: changes long-run aggregate supply, negative aggregate demand shock, positive aggregate demand shock, changes both short-run and long-run aggregate supply, negative aggregate supply shock, positive aggregate supply shock

Please answer the following questions: There are 2 correct answers:

Define capital stock. Use the aggregate demand and supply to show the effects of a decrease in interest rates in the short-run and in the long-run. Explain why an increase in consumer spending would not have the same effect in the long-run.

The U.S. economy is initially in short-run macro-equilibrium.  Assume that China falls into a deep recession.  As a result, we observe the following in our economy:   Question 34 options:   a)  Both the price level and real GDP increase.   b)  The price level falls and real GDP increases   c)  Both the price level and real GDP decrease   d)  The price level increases and real GDP falls

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a temporary increase in oil price, then we would expect that in the short run, a. real GDP will rise and the price level might rise, fall, or stay the same. b. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the same. 20. Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a temporary increase in oil price. then we would expect that in the short run, real GDP will rise and the price level might rise, fall, or stay the same. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the…

Suppose Canada's economy is in a long-run equilibrium with real GDP equal to potential output. Now suppose there is an increase in the Canadian-dollar price of all imported raw materials. In the short run, In the long run, A. real GDP and the price level both fall; real GDP is below its original level with a lower price level B. real GDP falls and the price level rises; real GDP and the price level return to their original levels C. real GDP and the price level both rise; real GDP is above its original level with a higher price level D. real GDP rises and the price level falls; real GDP returns to its original level with a lower price level E. real GDP and the price level both rise; real GDP returns to its original level with a higher price level

Economics 8