You will draw four separate Aggregate-Demand/Aggregate-Supply graphs. Each graph will have one curve shift. Be sure to label axis, curves, and equilibrium. Change colors to show the shift and label the new equilibrium. Draw an ADAS graph at equilibrium. Suppose the interest rates on loans on capital goods decrease. Which curve will shift? Draw the new equilibrium. Draw an ADAS graph at equilibrium. Suppose there is an decrease in government spending. Which curve will shift? Draw the new equilibrium. Draw an ADAS graph at equilibrium. Suppose the income of our trading partners increase. Which curve will shift? Draw the new equilibrium. Draw an ADAS graph at equilibrium. Suppose there is widespread concern that prices will continue to rise in the future. Which curve will shift? Draw the new equilibrium.

Answered: You will draw four separate…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You will draw four separate Aggregate-Demand/Aggregate-Supply graphs. Each graph will have one curve shift. Be sure to label axis, curves, and equilibrium. Change colors to show the shift and label the new equilibrium.

Draw an ADAS graph at equilibrium. Suppose the interest rates on loans on capital goods decrease. Which curve will shift? Draw the new equilibrium.
Draw an ADAS graph at equilibrium. Suppose there is an decrease in government spending. Which curve will shift? Draw the new equilibrium.
Draw an ADAS graph at equilibrium. Suppose the income of our trading partners increase. Which curve will shift? Draw the new equilibrium.
Draw an ADAS graph at equilibrium. Suppose there is widespread concern that prices will continue to rise in the future. Which curve will shift? Draw the new equilibrium.

Expert Solution

Step 1

An AD-AS graph is a macroeconomic model that shows the relationship between aggregate demand (AD) and aggregate supply (AS) in an economy.

The AD-AS graph has two axes, the vertical axis represents the price level, while the horizontal axis represents the quantity of output. The AD curve slopes downwards and to the right, representing the inverse relationship between the price level and quantity demanded. The AS slopes upwards and to the right, representing the direct relationship between the price level and quantity supplied.

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