MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Chapter 10.A, Problem 17SQ
To determine
The movement of economy from E2 to long run equilibrium.
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Students have asked these similar questions
Assume the economy is in short-run equilibrium and has an upward-sloping AS
curve. Now assume that the government significantly increases spending (G). Choose
the answer that describes how the economy responds.
The AD curve shifts to the right and causes the prices of goods and services
O A)
to rise, which in turn shifts the AS curve vertically upwards. By the end of the
adjustment process the economy is at a new equilibrium with higher prices,
but the change in output is uncertain. Depending on the relative size of the
shifts in the AD and AS curve, GDP at the new equilibrium may be higher or
lower that at the initial equilibrium.
The AE curve shifts vertically upward by the increase in G, the AD curve
B)
shifts to the right, and prices start to rise. As prices rise the AE curve shifts
vertically down, AD falls along the new curve, output rises along the AS
curve, and in the new equibrium the economy's GDP is higher.
Households increase their desired spending, and aggregate demand…
b) Discuss the effects of a tax increase on a
small and closed economy's short run
equilibrium
This question considers the impact of a tax decrease in the AD-AS framework. The figure depicts an
economy in which output equals potential.
Suppose that the government gives households a tax rebate.
1.) Using the line drawing tool, draw the short-run effect of the government giving households a tax rebate.
Properly label this line.
2.) Using the point drawing tool, plot the new short-run equilibrium. Label this point 'e₁'.
Carefully follow the instructions above and only draw the required objects.
Price Level
LRASO
eo
Real GDP, Y ($, Trillions)
SRASO
ADO
Select
Line
Point
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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- An economy is described by the following equations: C = 80+ 0.9 (Y-7) IP = 100 G NX T = 180 Y* = 1,800 The multiplier in this economy is 10. a. Find a numerical equation relating planned aggregate expenditure to output. Instructions: Enter your response for mpc rounded to one decimal place. PAE = + Y = 150 Output Y = 30 b. Construct a table to find the value of short-run equilibrium output. Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. 1,780 1,880 1,980 2,080 2,180 Planned aggregate expenditure (PAE) Y- PAE Short-run equilibrium output is. c. By how much would government purchases have to change in order to eliminate any output gap? By how much would taxes have to change? In order to eliminate any output gap, government purchases would have to be (Click to select) reduced increased by . In order to eliminate any output gap, taxes would have to be (Click to select) increased reduced by . d. If y* = 2,070, then by…arrow_forwardFor each situation below, analyse whether it shifts the aggregate demand (AD) curve, the aggregate-supply (AS) curve, both, or neither. Then, if it does shift a curve, construct the AD-AS diagram to show the effect on the economy in the long-run. a) One extraordinary impact of COVID-19 pandemic to the U.S. economy is a massive increase in saving. U.S. recorded nearly tripled saving over the first two quarters of 2020, from $1.59 trillion annualized in the first quarter to $4.69 trillion in the second, which is by far the biggest increase in modern history. b) The prolonged monsoon rain has caused the production of vegetables in Cameron Highlands fell by about 30%. It has severely impacted a lot of crops, including fruits and flowers. Besides, labor shortages due to the pandemic makes the matters worse.arrow_forwardThe graph models an economy in equilibrium with a real GDP of $180 billion. Suppose that consumers' expectations about future incomes change, causing unplanned inventory investment to increase by $30 billion. Shift the planned aggregate expenditure (AE) line to show the effect of this change. *Image* 1) This change will cause the equilibrium level of real GDP to a) decrease. b) remain unchanged. c) increase. 2) By how much will GDP change once the new equilibrium is reached? If GDP will decrease, be sure to include a negative sign. GDP change: $ ________ billionarrow_forward
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