Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 10, Problem 11CQ
(a)
To determine
Illustrate the graph of the full employment in the aggregate
(b)
To determine
Illustrate the graph of an economic boom in the aggregate demand and supply model.
(c)
To determine
Illustrate the graph of a recession in the aggregate demand and supply model.
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Students have asked these similar questions
What is the relationship among the AD, SRAS and LRAS curves when the economy is in macroeconomic equilibrium?
Construct the AD, SRAS, and LRAS curves for an economy experiencing
1. full employment
2. an economic boom,
3. a recession.
What will happen in each case if it's only temporary? What will happen in each case if it's permanent?
Assume that the United States'
macroeconomic equilibrium is equal to the
potential GDP. Americans are becoming
more cautious with their household
spending due to the uncertainty of the
presidency of Donald Trump.
Using the AD-AS model, explain carefully
the immediate and long-term effects of the
event on the economy. Draw the
appropriate AD-AS diagram to support
your explanation.
Chapter 10 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
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Similar questions
- An improvement in technology causes which curve(s) to shift? SRAS, and LRAS curves The AD and SRAS curves The AD curve Only SRASarrow_forwardWhich of the following would NOT cause a shift in AD? Select one: a. A reduction in interest rates b. A fall in the cost of production c. A reduction in income tax d. An increase in government spendingarrow_forwardDescribe the differences between recessionary and inflanationary gaps.arrow_forward
- Suppose Mexico, one of our largest trading partners and purchaser of a large quantity of our exports, goes into a recession. Use the AD/AS model to determine the likely impact on our equilibrium GDP and price levearrow_forwardWhich of the following is a major difference between the AD-AS model and the dynamic AD-AS model? The dynamic AD-AS model assumes OA. AD only includes consumption, investment, and government purchases, while the AD-AS model assumes AD includes consumption, investment, government purchases and net exports. B. the SRAS is stable and will not shift, while the AD-AS model assumes the SRAS can only change with an exogenous event such as oil price changes. OC. the economy does not experience long-run growth, while the AD-AS model assumes there is constant inflation in the economy. OD. potential GDP increases continually, while the AD-AS model assumes the LRAS does not change.arrow_forwardHelp mearrow_forward
- Explain and illustrate graphically recessionary and inflationary gaps.arrow_forwardWill the shift of SRAS to the right tend to make the equilibrium quantity and price level higher or lower? What about a shift of SRAS to the left?arrow_forwardAssume there is a particular short-run aggregate supply curve for an economy and the curve is relevant for several years. Use the AD-AS analysis to show graphically why higher rates of inflflation over this period would be associated with lower rates of unemployment, and vice versa. What is this inverse relationship called?arrow_forward
- Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?arrow_forwardThe imaginary country of Harris Island has the aggregate supply and aggregate demand curves as shown in Table below. Price Level 100 120 140 160 180 AD 700 600 500 400 300 AS 200 325 500 570 620 a. Plot the AD/AS diagram with the axes labeled. Identify the equilibrium. b. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. c. How will the shift in AD affect the original output, price level, and employment?arrow_forwardUsing an AD/AS diagram (starting from long-run/full employment equilibrium), graphically show and verbally describe how each of the following events would affect the U.S. economy's equilibrium real GDP and price level. a. Discovery and implementation of new technology b. Mexico's economic growth increases faster than ours c. There is a general increase in the price of raw materials e. The cost of labor (wages) rises g. The price of oil is expected to fall d. The number of workers in the labor force decreases due to pandemic retirements/death f. A new Congress decreases government spending h. Consumer confidence fallsarrow_forward
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