The graphs illustrate an initial equilibrium for the economy. Suppose that the government increases taxes. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Aggregate price level Short-run graph LRAS Short-run equilibrium. Real GDP RAS AD Aggregate price level Long-run graph LRAS Long-run equilibrium Real GDP AD SRAS

Explain, in detail, how the adjustment to macroeconomic equilibrium occurs when spending is less than production. Be sure to discuss how inventories play a crucial role in the adjustment process. State what happens to GDP and employment during the adjustment process.

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Assume initially an economy is at its long run equilibrium. Then, price of oil in theworld increases. What will happen to real GDP and aggregate price level in the short runequilibrium following the increase in price of oil? Use the Aggregate Demand – AggregateSupply model to answer the question.

Suppose the people of Canada has reduced their spending on goods and services from the United States.   What will be the effect on real GDP and the price level in the short run? In the long run? Show your results graphically.

Question: The attached picture shows the aggregate demand/aggregate supply situation in the U.S.    What is the value of actual GDP? What is the value of the GDP deflator?  Assume that people and businesses become pessimistic about the future of the economy; how will this affect the graph above in the short run? (i.e., which curve(s) will shift, and in which direction?)   After the short-run event in part b, what will happen to actual GDP? What will happen to the price level?   After the short-run event in part b, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion).   What long-run adjustments will be made in this economy as a result of the short-run changes in part c? How will the curve(s) shift in response to these long-run adjustments?   After the long-run adjustments in part e, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion).

The graph shows an economy in macroeconomic equilibrium.     Now, three things occur: The world economy goes into an expansion, domestic businesses expect future profits to rise, and the government increases its expenditure on goods and services as international tensions increase.   On the graph, draw one new curve that shows the combined effect of the three events. Label it.   Draw a point at the new macroeconomic equilibrium.   >>> Draw only the objects specified in the question.

# I am guessing, the price of imports will decrease is wrong.

Answer both questions that need to be answered and the second question has a graph that’s needs to be answered as well.

Suppose our economy is in macroeconomic equilibrium (also called "general equilibrium") with an upward-sloping aggregate supply curve and a downward-sloping aggregate demand curve.  An increase in aggregate demand will:   Question 5 options:   a)  Increase aggregate supply.   b)  Decrease the price level.   c)  Causes the aggregate supply to shift to the right.   d)  Increase real GDP.   e)  Reduce the number of discouraged workers in the unemployment rate.