MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 10.A, Problem 7SQ
To determine
The point where the LRAS, SRAS, and the AD curves intersects.
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Students have asked these similar questions
Use the AD-AS model diagram to address the effects of increasing government expenditure in the short-run and in the long-run equilibrium.
Using 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 falls
There is a decrease in AD. Show on one AD/AS diagram the effect on output and
prices in both the short-run and the long-run. Mark the starting price and output P₁
and QN. Mark the price and output at the end of the short-run P2 and Q2. Mark the
price and output at the end of the long-run P3 and Q3. Be sure to label all the lines on
your diagram, and if a line shifts, mark the order of the shifts with subscript numbers
after the symbols (for example AD₁ shifts to become AD₂). Next to the diagram,
state the effect on prices, output, unemployment, and wages in both the short-run and
long-run. Assume we start at QN.
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
- Question 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_forwardThe price level rises, and this changes the real value of consumers’ wealth. Does this cause a movement along the AD curve, or a shift to a new AD curve? A. A movement along the AD curve B. A shift to a new AD curve C. None of the Abovearrow_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_forward
- Consumption $550 Investment $200 Exports $60 Imports $90 Government Spending $100 Taxes $70 Potential Real Output (Long run Real Output) $800 The above macroeconomic data are from the economy in 2019. Dollar values are measured in billions of 2019 dollars. (a) Is the economy facing a recessionary gap, an inflationary gap, or neither? Explain using numbers. (b) Based on your answer to part (a), how will the economy adjust in the long run in the absence of any government policy action? Explain.arrow_forwardThis question considers the impact of a tax decrease in the AD-AS framework. The figure depicts an economy in which output equals potential. Suppose that the government gives households a tax rebate. 1.) Using the line drawing tool, draw the short-run effect of the government giving households a tax rebate. Properly label this line. 2.) Using the point drawing tool, plot the new short-run equilibrium. Label this point 'e₁'. Carefully follow the instructions above and only draw the required objects. Price Level LRASO eo Real GDP, Y ($, Trillions) SRASO ADO Select Line Pointarrow_forwardinclude a graph that shows where Canada currently is on the business cycle. Also include an AD-AS Model graph that shows if the economy is currently experiencing a recessionary gap, expansionary gap, or long run equilibrium.arrow_forward
- Suppose an economy is initially in equilibrium at point m. The economy is likely to move to equilibrium at point k as a result of: Price Level LRAS SRAS2 (P) SRAS: k P2 P: m AD: Q: QN Real GDP (Q) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a decrease in consumer confidence. b an increase in personal income taxes. a decrease in the wage rate, d. an adverse (negative) supply shock.arrow_forwardPessimism (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.arrow_forwardprice 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_forward
- Q3-7 In the AD/AS framework, when the economy is in long-run equilibrium, Select one: a. inflation is occurring. b. the entire labour force is employed. c. actual prices are equal to expected prices. d. actual levels of income and employment are less than the natural levels of income and employment.arrow_forwardIn the economy depicted in the graph, what happens if there is no intervention from policy makers? Use the graph, where LRAS represents long-run aggregate supply, SRAS represents short-run aggregate supply, and AD represents aggregate demand, to demonstrate the answers by shifting the appropriate curve or curves. Prices will decrease. increase. Output will decrease. increase. Aggregate price level (P) LRAS Real output (Q) SRAS ADarrow_forward
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