MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 10.A, Problem 12SQ
To determine
The intersection of the AD and the short run
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Students have asked these similar questions
Suppose the economy experiences a "supply shock" due to a fall in oil prices. As a result, the economy experiences a/an ___________in the price level and a/an _______in the level of output(GDP)
Group of answer choices
Decrease; decrease
Increase; increase
Decrease; increase
Increase; decreas
Pessimism (suggestion: draw the AS-AD diagram to help your analysis and start with
the long-run and short-run equilibrium, i.e. the intersection of LRAS, SRAS and AD
curves)
Suppose the economy is in long-run equilibrium. Then because of corporate scandal,
international tensions, and loss of confidence in policymakers, people become
pessimistic regarding the future and retain that level of pessimism for some time.
Refer to Pessimism. In the short run what happens to the price level and real GDP?
O 1) Both the price level and real GDP rise.
2) Both the price level and real GDP fall.
3) The price level rises and real GDP falls.
4) The price level falls and real GDP rises.
5. AD; SRAS; LRAS; Short-run equilibrium; Long-run equilibrium; Recessionary gap and
Inflationary gap. Consider diagram below to answer the following questions:
LRAS
SRAS
`AD1
Q1
Real GDP
(a) – Use Point 1 and Point 2 to explain the difference between the short-run equilibrium and the
long-run equilibrium.
(b) - The economy is currently producing Qi. At this level of Real GDP, the economy is in
a(n)_
. (recessionary gap or inflationary gap). Select one.
(c) - The unemployment rate is lower at
than
- (Q:/QN, QN/ Q1). Select one.
(d) – At QN, cyclical unemployment (Uc) is
(positive, negative, zero). Select one.
Price Level
Chapter 10 Solutions
MACROECONOMICS FOR TODAY
Ch. 10.7 - Prob. 1YTECh. 10.A - Prob. 1SQPCh. 10.A - Prob. 2SQPCh. 10.A - Prob. 3SQPCh. 10.A - Prob. 4SQPCh. 10.A - Prob. 5SQPCh. 10.A - Prob. 6SQPCh. 10.A - Prob. 1SQCh. 10.A - Prob. 2SQCh. 10.A - Prob. 3SQ
Ch. 10.A - Prob. 4SQCh. 10.A - Prob. 5SQCh. 10.A - Prob. 6SQCh. 10.A - Prob. 7SQCh. 10.A - Prob. 8SQCh. 10.A - Prob. 9SQCh. 10.A - Prob. 10SQCh. 10.A - Prob. 11SQCh. 10.A - Prob. 12SQCh. 10.A - Prob. 13SQCh. 10.A - Prob. 14SQCh. 10.A - Prob. 15SQCh. 10.A - Prob. 16SQCh. 10.A - Prob. 17SQCh. 10.A - Prob. 18SQCh. 10.A - Prob. 19SQCh. 10.A - Prob. 20SQCh. 10 - Prob. 1SQPCh. 10 - Prob. 2SQPCh. 10 - Prob. 3SQPCh. 10 - Prob. 4SQPCh. 10 - Prob. 5SQPCh. 10 - Prob. 6SQPCh. 10 - Prob. 7SQPCh. 10 - Prob. 8SQPCh. 10 - Prob. 9SQPCh. 10 - Prob. 10SQPCh. 10 - Prob. 11SQPCh. 10 - Prob. 1SQCh. 10 - Prob. 2SQCh. 10 - Prob. 3SQCh. 10 - Prob. 4SQCh. 10 - Prob. 5SQCh. 10 - Prob. 6SQCh. 10 - Prob. 7SQCh. 10 - Prob. 8SQCh. 10 - Prob. 9SQCh. 10 - Prob. 10SQCh. 10 - Prob. 11SQCh. 10 - Prob. 12SQCh. 10 - Prob. 13SQCh. 10 - Prob. 14SQCh. 10 - Prob. 15SQCh. 10 - Prob. 16SQCh. 10 - Prob. 17SQCh. 10 - Prob. 18SQCh. 10 - Prob. 19SQCh. 10 - Prob. 20SQ
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Similar questions
- price level LRAS SRAS1 SRAS2 D Refer to the above Figure. If the economy is AD1 AD2 quantity of output at A and there is a stock market crash, in the short run the economy 1) stays at A. 2) moves to B. 3) moves to C. 4) moves to D.arrow_forwardConsumption $550 Investment $200 Exports $60 Imports $90 Government Spending $100 Taxes $70 Potential Real Output (Long run Real Output) $800 The above macroeconomic data are from the economy in 2019. Dollar values are measured in billions of 2019 dollars. (a) Is the economy facing a recessionary gap, an inflationary gap, or neither? Explain using numbers. (b) Based on your answer to part (a), how will the economy adjust in the long run in the absence of any government policy action? Explain.arrow_forwardQuestion 6 Suppose that an economy is currently in its long run equilibrium. Suppose that the government decides to increases government spending. Being concerned about the budget implications, it also raises the income tax rate to maintain a balanced budget. Using the AD- AS model, explain the impact of this policy on the economy in the: A. Short Run B. Long Runarrow_forward
- Describe what the effect on aggregate demand would be, other things being equal, if exports increase. both imports and exports decrease. consumption decreases. investment increases. investment decreases and government purchases increase. the price level increases. the price level decreases.arrow_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_forwardWhich items describe long-run aggregate supply (LRAS), and which ones describe short-run aggregate supply (SRAS)? Long-Run Aggregate Supply The unemployment rate, u, may be above or below the natural rate. Unemployment is at the natural rate, u*. All prices can change. Short-Run Aggregate Supply + Only some prices can change. The economy's output may be above or below the full-employment level, Y*. The economy's output, Y, is at the full- employment level.arrow_forward
- 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?arrow_forwardFigure: Inflationary and Recessionary Gaps Price level P₂ P₂ P₁ Panel (a) LRAS SRAS Y, Y Real GDP AD Price level P₂ P₂ P₁ Panel (b) LRAS YY₁ Real GDP SRAS AD Refer to Figure: Inflationary and Recessionary Gaps. If the economy is in short-run equilibrium at Y, in panel (a), the economy is in: full employment. a recessionary gap. an inflationary gap. simultaneous short-run and long-run equilibrium.arrow_forwardDuring the 1930s the U.S. entered the Great Depression. During the Great depression investment fell from a yearly rate of $16.7 billion to $1.7 billion. In 1932, President Hoover increased income taxes. Assume the MPC is .92 C). If the AD shortfall in 1934 was $300 billion, what change in government expenditures on goods and services (G) would you have recommended to restore full-employment? D). If the AD shortfall in 1934 was $300 billion, what change in income/transfer payments would you have recommended ? E). If the AD shortfall in 1934 was $300 billion, what change in income taxes would you have recommended ?arrow_forward
- Aggregate Price Level (P) Aggregate Output (Q) ADO desmos Long-Run Macro Equilibrium LRAS SRAS in both directions Shift the AD curve Show Transcribed Text Adjust the interactive graph in order to observe the economy in both short-run and long-run equilibrium. Use what is observed in order to answer the questions that follow. On a temporary timeframe, the economy can expand past full employment. a. In order to produce this higher level of output when the economy is already producing at potential GDP, what must businesses do? pay workers overtime pay higher wages in order to entice employed workers to leave their current firms run machines longer, which increases maintenance costs reduce worker wages Show Transcribed Text b. What is an important distinction of this rightward shift in AD, when compared to the same shift when short-run equilibrium is below full employment? An increase in aggregate demand when above full employment causes a(n) compared to the equivalent shift that occurs…arrow_forwardReal aggregate expenditure, AE (trillions of 2000 dollars) 0 45° Figure 2-2 N A) government expenditures increase. C) the firm's cash flow rises as profits rise. Y = AE AE₂ AE₁ Real GDP, Y (trillions of 2000 dollars) 17) Refer to Figure 2-2. If the U.S. economy is currently at point N, which of the following could cause it to move to point K? B) corporate taxes increase. D) household wealth rises.arrow_forwardFollowing a demand-side recession, what happens to full employment GDP (C+I+G) after a few recessions and over-expansion? Why is this composition problematic for the long run?arrow_forward
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