ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and which direction? What happens to aggregate output and the price level in each case? a. The price level changes. b. Consumer confidence declines. c. The supply of resources increases. d. The wage rate increases.arrow_forwardWhich of the below is one of the reasons that the Aggregate Demand curve is downward sloping? The income effect of a price change, aggregated across many markets The substitution effect of a price change, aggregated across many markets Higher inflation means nominal incomes are higher so households can afford to spend more Higher domestic price levels cause exports to fall and imports to risearrow_forwardIn this aggregate demand model, which one of the following statements correctly describes the economy if it is at point Y on the diagram? 1 - The economy is at the full employment equilibrium 2- There are forces that are tending to make income (output) fall. 3-There are forces that are tending to make income (output) rise. 4-The economy is in equilibrium at less than full employment.arrow_forward
- The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 240 200 160 40 0 0 3 SRAS[120] 6 9 12 REAL GDP (Trillions of dollars) 15 18 SRAS[120] 0 (?) Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph:arrow_forwardWhich of the following shifts the long-run aggregate supply curve to the left? Either an increase in the price of imported natural resources or a reduction in the college-educated workforce. Neither an increase in the price of imported natural resources nor a reduction in the college-educated workforce. An increase in the price of imported natural resources and an increase in the college-educated workforce. Both an increase in the price of imported natural resources and an increase in technological progress.arrow_forwardGiven the following circumstances, indicate whether or not the aggregate supply curve would shift and, if so, which way would it shift: The price of a barrel of oil doubles An advance in alternative energy technology significantly reduces its cost In order to maintain a relatively clean air quality, a carbon emissions tax is levied against firms with a carbon footprint As a result of fracking, the price of natural gas is significantly reduced Advances in technology increase the productivity of the American worker, on average, by 30%arrow_forward
- In 2010, the economy of Quarterville had an aggregate demand and aggregate supply according to the following schedule: Price level Aggregate Demand Short-Run Aggregate Supply Long-Run Aggregate Supply 90 $1505.00 $1205.00 $1465.00 100 $1470.00 $1270.00 $1465.00 110 $1435.00 $1335.00 1 $1465.00 120 $1400.00 $1400.00 $1465.00 130 $1365.00 $1465.00 $1465.00 140 $1330.00 $1530.00 $1465.00 150 $1595.00 $1465.00 $1295.00 What was Quarterville's long-run equilibrium output in 2010? $|arrow_forwardDescribe 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.arrow_forwardThe following graph plots the aggregate demand curve for this economy. Show the impact of the decrease in the price level by moving the point along the curve or shifting the curve. PRICE LEVEL 300 250 200 150 100 50 0 10 Aggregate Demand 20 30 40 OUTPUT (Billions of dollars) 50 60 The change in the interest rate found in the previous task will lead to a in the quantity of output demanded in the economy. Aggregate Demand in residential and business spending, which will causearrow_forward
- Use appropriate graph(s) to explain the effect of each of the following events, if any, on the position of the short- and long-run aggregate supply curves and the aggregate demand curve for a small open economy. a) The country becomes home to thousands of immigrants who significantly increase its labour force. b) The Central Organization of Trade Unions in the country wins a 10 percent increase in money wage rates for low-income workers. c) There is a decrease in the income of the country's major trading partners. d) The country starts to harness geothermal energy, which it puts to use and sells the excess energy to neighbouring states.arrow_forwardThe following graph shows an increase in aggregate supply (ASAS) in a hypothetical economy. Specifically, aggregate supply shifts to the right from AS1AS1 to AS2AS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. The following table lists several determinants of aggregate supply. Complete the table by indicating the changes in the determinants necessary to increase aggregate supply. Determinant Change Needed to Increase ASAS Nominal Wage Rate Tax Rates Technologyarrow_forwardSuppose firms become very pessimistic about future business conditions and significantly reduce investment spending. Show the short-run effect of this pessimism on the aggregate-demand curve. Price Level LRAS Aggregate Supply * Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply LRASarrow_forward
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