The great expert Hand written solution is not allowedGive explanation of the correct option and explanation of the incorrect options The government is concerned about an inflationary gap. Shiftthe AD curve to provide a graphical representation of aninflationary gap and move the point, ESR, to the short-runequilibrium associated with the inflationary gap.Which of the following policies will help to eliminate theinflationary gap?O an increase in government transfersa tax cutan increase in military spendingan increase in taxesAggregate price levelSRLRASReal GDPADSRAS

Ans. ) Given that the question is related to the concept of the inflationary gap. Inflation is the…

Answered: The government is concerned about an…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1P

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Similar questions

The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
Which of the following will NOT shift the ADT curve? O a. A rise in government spending O b. A rise in exports Ос. A rise in interest rates O d. A rise in consumer confidence
Illustrate each of the following situations with a graphshowing AS and AD curves, and explain what happensto the equilibrium values of the price level and aggregateoutput:a. A decrease in G with the money supply held constant bythe Fedb. A decrease in the price of oil with no change ingovernment spendingc. An increase in Z with no change in governmentspendingd. An increase in the price of oil and a decrease in G
Which of the following will NOT shift the ADTT curve? O a. A rise in consumer confidence O b. A rise in interest rates O c. A rise in government spending O d. A rise in exports
1Why low rate inflation is considered necessary for economic grwoth? Oa It does not affect the purchasing power of wages Ob. It indicates that the currency is in continuous demand by the people Oc taffects only the rich and not the poor Od itact as an incentive to boost in supply in the economy 2When the economy is in Keynesian macroeconomic equilibrium, planned investment is greater than actual investment. O a False O b. True 3Government fixes the floor and ceiling price which will not allow the producers to increase the price on their wish, this is a type of. O a Physical control called price pegging O b. Monetary policy control measures O. Physical control called price tagging Od. Fiscal policy control measures O e None 4Rising output coupled with falling prices is called stagflation O a. False O b. True 5The Value of marginal propensity to consume lies O a. O to 1 O b. Less than zero Oc -1 to 1 Od. Between O to 1 6The Central Bank way to control inflation is Oa Monetary policy…
Attempts Average / 2 5. The aggregate supply curve in the simple Keynesian model Complete the following statement to make it true. "In the AD-AS framework, the simple Keynesian model includes an aggregate supply curve that Natural Real GDP." until the economy reaches its slopes upward Under what condition will an increase in total spending lead to an equivalent increase in Real GD O When the economy is producing more than Natural Real GDP. O When the economy is producing at Natural Real GDP. O When the economy is producing less than Natural Real GDP. O When the aggregate supply curve is vertical. is horizontal is vertical
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…
Please help with this practice question
According to Keynes, the government may fight unemployment by O raising its budget deficit O increasing the supply of money O through a rise in its spending and a cut in tax rates O all of the above
R MPA a MPB ISB ISA the Fed wilIN To prevent a Consider figure, if there is a sharp increase in consumer confidence, the economy will move from point and the economy moves from point O A. a to point d; recession; lower interest rates; d to point b O B. b to point a; bubble; raise interest rates; a to point d O C. d to point c recession; lower interest rates; c to point b O D.a to point d; recession; lower interest rates; d to pointc 12 O E. c to point b; bubble; raise interest rates; b to point C LG

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