MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 10.A, Problem 3SQP
To determine
Graphical illustration of increase in the aggregate demand by $4 trillion.
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Students have asked these similar questions
Assume that the long-run aggregate supply
curve is vertical at Y= 3,000 while the short-run
aggregate supply curve is horizontal at P = 1.0.
The aggregate demand curve is Y = 2(MIP) and
M = 1,500.
▪a. Is the economy is initially in long-run
equilibrium?what are the values of P and Y?
▪b. If M increases to 2,000, what are the new
short-run values of P and Y?
▪c. Once the economy adjusts to long-run
equilibrium at M = 2,000, what are P and Y?
Suppose the economy is in a long-run equilibrium, as shown in the following graph.
Now suppose that a stock market boom causes aggregate demand to rise.
Use your diagram to show what happens to output and the price level in the short run.
Price Level
LRAS
Aggregate Supply
Aggregate Demand
Quantity of Output
Aggregate Demand
Aggregate Supply
LRAS
The full employment level of real GDP is $6 billion for the recently formed island nation of Turtleopolis. Use the line segment to show long‑run aggregate supply on the graph.
Look at the image to adjust
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
- How does an increase in aggregate demand affect output, unemployment, and the price level in the short run?arrow_forwardAssume that the United States economy is currently in a recession in a short-run equilibrium. Draw a correctly labeled graph of aggregate demand and aggregate supply in the recession and show each of the following. The current equilibrium output and price levels, labeled Ye and PLe, respectively.arrow_forwardIf the Federal Reserve wants to increase aggregate demand (i.e., spending growth) which variable (i.e. letter) in the quantity equation will it alter? Show how The Federal Reserve’s action affects the ASAD graph? Use the ASAD graph and starting with an economy that is in long run equilibrium.arrow_forward
- Suppose the economy is in a long-run equilibrium a)Draw a diagram to illustrate the state of the economy . Be sure to show aggregate demand, short-run aggregate supply, and long-run aggregate supply. b) The federal government increases spending on national defense. c) A technological improvement raises productivityarrow_forwardEnd of Chapter 3.5a Questia The graph shows the economy in long-run equilibrium at point A. LRAS, SRAS, Now assume that there is a large increase in demand for U.S. exports. 1.) Use the line drawing tool to show the resulting short-run equilibrium on your diagram. Label any new aggregate demand or aggregate supply curve as AD2, SRAS, or LRAS, as appropriate. 2.) Use the point drawing tool to locate the new short- run equilibrium point. Label this point B. Now consider the adjustment of the economy back to long-run equilibrium. 3.) Use the line drawing tool to show the resulting long-run equilibrium on your diagram. Label any new aggregate demand or aggregate supply curve appropriately. 4.) Use the point drawing tool to locate the new long- run equilibrium point. Label this point C. Carefully follow the instructions above, and only draw the required objects. AD1 Real GDP (trillions of 2012 dollars) Click the graph, choose a tool in the palette and follow the instructions to create your…arrow_forwardSuppose that the White House decides to sharply reduce military spending without increasing government spending in other areas. a) Comment on the effect of this measure on aggregate demand. b) Show your answer graphically.arrow_forward
- The economy is in a full-employment equilibrium in year 1. In year 2, the price level decreased and the level of output increased. The most likely cause of the new equilibrium is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An increase in aggregate supply b A decrease in aggregate supply с An increase in aggregate demand A decrease in aggregate demandarrow_forwardHow does the economy return to equilibrium in response to changes in aggregate demand (AD) and aggregate supply (AS) in both the short run and long run.arrow_forwardThe graph on the right shows a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium at point A. Assume that there is an unexpected increase in the price of oil. 1.) Use the line drawing tool to show the resulting short-run equilibrium on your graph. Label any new aggregate demand or aggregate supply curve as AD2, SRAS2 or LRAS2 as appropriate 2) Use the point drawing tool to locate the new short-run equilibrium point Label this point B Carefully follow the instructions above, and only draw the required objects Price level (GDP Deflator, 2005 = 100) LRAS₁ A SRAS₁ Real GDP (trillions of 2005 dollars) AD1arrow_forward
- The economy is in a full-employment equilibrium in year 1. In year 2, the price level decreased and the level of output increased. The most likely cause of the new equilibrium is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. An increase in aggregate supply b A decrease in aggregate supply An increase in aggregate demand d A decrease in aggregate demandarrow_forwardChanges in what four variables will shift the long run aggregate supply curve?arrow_forwardExplain what will happen as a result of the following events. In each case, draw an aggregatedemand and short-run aggregate supply diagram showing the initial equilibrium output level (Y0) andprice level (P0). Show any changes, indicate the final equilibrium output level and price level andexplain briefly.a. The economy is in a recession. An increase in government purchases occurs. The Fedtries to maintain the interest rate. b. The economy is operating near full capacity. Now environmental pollution standardsare tightened substantially.arrow_forward
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