Use the dynamic model of aggregate demand and supply to illustrate a situation where aggregate demand and short-run aggregate supply are both increasing from year 1 to year 2, resulting in a higher price level and higher level of real GDP at macroeconomic equilibrium in year 2.
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31) Use the dynamic model of aggregate demand and supply to illustrate a situation where aggregate demand and short-run
32) Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast. As a result there was an unexpected decline in oil and natural gas supplies in 2005. Suppose that this caused an increase in the price level and a decline in real GDP in 2006. Also assume that potential real GDP continued to grow due to other factors. You can assume the aggregate demand curve did not change. Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.
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- QUESTION 5 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible in the long run. The initial full-employment level of output is Y=900 and the initial price level is P=100: The aggregate demand curve is given by y= 1500 - 6P: Scenario 3, long run: A major pandemic results in job losses, greater precautionary saving, and shutdowns and social-distancing policies. As a result, the full- employment level of output drops to y =830 and the demand curve shifts to y =1445-6p. In the long run, the output is and the price level is Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about…Does each scenario below cause a movement along the curve or a shift in the curve? Explain using the model of Aggregate Demand and Aggregate Supply. [1] Consumers in the U.S. read negative economic news and they expect weak future economic growth. [2] Due to the decrease in the price level in the U.S., consumers substitute out of clothes made overseas into clothes made in the US. [3] An increase in the price level leads to less savings, which increases the interest rate. [4] Several European economies go into recession due to the current pandemic.As you know, supply and demand shifts are caused by one of their determinants. Shifts in aggregate demand (AD) show the effect of events on price level and Real GDP. Any event that causes a change in consumer, business, or government spending or any change in net exports (C+l+G+Xn) will shift AD. Any event that causes a change in production costs or increases productivity will shift aggregate supply (AS). Decide if the following events are Micro, shifting supply or demand, or Macro, shifting AD or AS. Give the direction in which the graph shifts. Demand Situation Aggregate Supply Aggregate Demand Supply Sales of Atlanta Braves gear grows with the success of the team. 1. The President and Congress pass a trillion dollar stimulus bill to provide aid during recession. 2. 3. Salmonella outbreak in peanut processing plants threatens lunches for school children. 4. Pomegranates are shown to be cancer fighting superfoods. Value of U.S. dollars declines, exports increase. 5. Global oil prices…
- Given: In the Great Recession that began in 2007-8, many workers become pessimistic about their future employment, which caused them to save more and spend less. Many employees lost their jobs, which caused them to spend less. The Aggregate Demand Curve shifted to the left <--, to show a decrease in demand. (Pay close attention to the direction of the shift of the Aggregate Demand Curve --to the left!) Exhibit 6 Three Ranges of the Aggregate Supply Curve Price Level (CPI) AD₁ ADO 8 28 Keynesian Range YK к AS Intermediate Rang Real GDP Classical Range Full employmentQUESTION 1 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible in the long run. The initial full-employment level of output is Y=900 and the initial price level is P=100: The aggregate demand curve is given by Y= 1500 - 6P: Scenario 1, short run: A reduction in personal income taxes shifts the demand curve to Y=1530 - 6P. In the short run, the output is and the price level is Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%".QUESTION 2 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible in the long run. The initial full-employment level of output is y- g00 and the initial price level is p= 100: The aggregate demand curve is given by y= 1500 - 6P: Scenario 1, long run: A reduction in personal income taxes shifts the demand curve to y=1530 – 6P. In the long run, the output is and the price level is Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%".
- QUESTION 3 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible in the long run. The initial full-employment level of output is y-g00 and the initial price level is p= 100: The aggregate demand curve is given by y=1500 – 6P: Scenario 2, short run: A major earthquake destroys a part of the economy's capital stock and reduces the full-employment level of output shifts to y = 880. In the short run, the output is and the price level is Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or “999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%".The graph on the right shows a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium at point A. Assume that there is an unexpected increase in the price of oil. 1.) Use the line drawing tool to show the resulting short-run equilibrium on your graph. Label any new aggregate demand or aggregate supply curve as AD2, SRAS2 or LRAS2 as appropriate 2) Use the point drawing tool to locate the new short-run equilibrium point Label this point B Carefully follow the instructions above, and only draw the required objects Price level (GDP Deflator, 2005 = 100) LRAS₁ A SRAS₁ Real GDP (trillions of 2005 dollars) AD1QUESTION 3 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible in the long run. The initial full-employment level of output is y-= 900 and the initial price level is p=100: The aggregate demand curve is given by y=1500 – 6P: Scenario 2, short run: A major earthquake destroys a part of the economy's capital stock and reduces the full-employment level of output shifts to y = 880 In the short run, the output is and the price level is Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%".
- 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.Describe the change in aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (In your answer, indicate whether the change will "Decrease" or "Increase" aggregate supply or have no effect.) (a) A rise in the average price of inputs; (b) An increase in worker productivity; (c) Government antipollution regulations become stricter; (d) A new subsidy program is enacted for new business investment in productive equipment; (e) Energy prices decline.Evaluate the following statements using relevant diagrams and provide detailedexplanations. The statements describe events that might shift aggregate demand (AD),aggregate supply (AS), both or neither. Clearly label your diagrams. A) A recent economic report suggests that consumer confidence has increased.B) Apple Inc. has announced a 50% discount on its new generation iPad devices foruniversity students.C) After a prolonged acceleration in economic activity, the government raises the rateof personal income tax.D) A continuing economic expansion has drawn in many working age people (andtheir families) from neighbouring countries in search of jobs and better lives.
