What is the effect of a rise in the price of oil on the U.S. economy? How does the economy return to its long-run equilibrium? What is stagflation? Price level (GDP price index, 2012 100) 145 The graph shows the U.S. economy at a full-employment equilibrium. Draw a curve that shows the effect of a rise in the price of ol. Label it 1. Draw a point at the new macroeconomic equilibrium. Label it E Draw a curve that shows the economy returning to a full-employment equilibrium with no action by the central bank or the government. Label it 2. Draw a point at the full-employment equilibrium. Label it Ez 135- Potential GDP AS 125- 115 Stagflation 105 OA. occurs when aggregate demand decreases by more than aggregate supply increases B. is another name for an inflationary gap AD C. has not been experienced in the United States since the Great Depression 85 160 20.0 Real GDP (trillons of 2012 dollars) 19.0 210 22.0 D. is a combination of recession and inflation. >>> Draw only the objects specified in the question. of

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.

The graphs illustrate an initial equilibrium for some economy. Suppose that the economy experiences a rise in aggregate demand. Use the graphs to illustrate the new positions of AD, SRAS, and LRAS as well as the new short-run and long-run equilibria resulting from this change. Short-Run Graph Long-Run Graph LRAS LRAS SRAS SRAS Equilibrium point Equilibrium point AD AD Real GDP Real GDP Aggregate price level Aggregate price level

Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? The government increases taxes to curb aggregate demand. Nominal wages, prices, and perceptions adjust downward to this new price level. O Nominal wages, prices, and perceptions adjust upward to this new price level. O The government increases spending to increase aggregate demand. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to nominal wages at the new short-run equilibrium. Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium. Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium. Real wages at the initial equilibrium are equal to real wages at the new long-run equilibrium.…

9

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

Consider the long-run equilibrium output, the potential output, the full-employment output, and the natural rate of output. Are their output levels the same or different?

On the following graph, use the black point (cross symbol) to show the short-run equilibrium. Then use the grey point (star symbol) to show the long- run equilibrium. PRICE LEVEL 120 110 100 1 LRAS REAL GOP In the short run, the price level is Natural Real GDP SRAS, SRAS, AD SRAS, AD AD₂ and Real GDP is ++ Short-Run Equilibrium ✡ Long-Run Equilibrium ? Natural Real GDP. In the long run, the price level is and Real GDP is A

The uncertainty surrounding the COVID-19 pandemic led firms to reduce their desired investment in 2020. What are the short-run and long run effects on the equilibrium price and output levels? Please explain  in words.

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.