Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 6E
To determine
The effect of a large earthquake on the short-run output.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Explain the importance of
macroeconomics in an
economy
This is an intermediate macroeconomics subject question.
Please explain clearly.
* 2. Analyzing macroeconomic events with the IS curve (I): Consider the following
changes in the macroeconomy. Show how to think about them using the IS
curve, and explain how and why GDP is affected in the short run.
(a) The Federal Reserve undertakes policy actions that have the effect of
lowering the real interest rate below the marginal product of capital. (We
will learn how this can occur in Chapter 12.)
(b) Consumers become pessimistic about the state of the economy and future
productivity growth.
(c) Improvements in information technology increase productivity and there-
fore increase the marginal product of capital.um noiqmnos d
Chapter 11 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- Q33. Draw a basic AD and SRAS graph (with LRAS constant) that shows the economy in the long-run equilibrium. Suppose that the war between Ukraine and Russia sharply increased the price of petroleum, causing the unit cost per output in the economy to increase. ***If you have any trouble to draw a graph, you can answer the question without a graph. If then, your answer should include all the necessary steps, not just the final outcome. a. Using the AD-AS model, briefly analyze the short-run effects of the war on equilibrium real GDP and the price level, either with a AD-AS diagram or without a diagram. b. How does the economy adjust back to long-run equilibrium? Briefly explain (either with a AD-AS diagram or without a diagram).arrow_forwardSuppose you are given the following information about an economy: Short run Aggregate Supply: SRAS = Y = 5000r+ 14,400 Long run Aggregate Supply: Aggregate Demand: Investment Spending: Consumption Spending: Government Spending: Net Exports (eX – iM): LRAS = Y* = 25,000 AD = Y=C+I+G+NX_ I = 4000 – 250r C = 1000 +0.75(Y – T) G = 2000 NX = 500 Taxes – Transfers: T = 2400 Monetary Policy: Money Demand: Money Market equilibrium: Fisher equation: where i is the nominal interest rate (i.e. when the interest rate is 7%, it means i= 7) r = 2 n м 3 20,000- 2000i M$ = MD i = r+T e. Find the short run equilibrium level of real GDP (Y), and inflation rate (t), in the short run. What is the output gap in the economy? Is it an expansionary or recessionary gap?arrow_forwardSuppose England's economy is in long-run equilibrium. As a result of the coronavirus, the British government orders all non-essential businesses to close and issue “shutter in” and other “stay at home” directives requiring its citizens and residents not to leave their residences absent emergencies and/or to purchase food and groceries from markets (that is, people cannot, for example, go to restaurants, movies or sporting events and the like.) If so, then we would predict that in the short-run England's A. real GDP will fall and the price level might rise, fall, or stay the same. B. real GDP will rise and the price level might rise, fall, or stay the same. C. the price level will rise, and real GDP might rise, fall, or stay the same. D. the price level will fall, and real GDP might rise, fall, or stay the samearrow_forward
- Consider the following changes in the macroeconomy and show how to think about them using the IS curve. Explain how and why GDP is affected in the short run (assuming the real interest rate is constant). The government offers a temporary investment tax credit: for each dollar of investment that firms undertake, they receive a credit that reduces the taxes they pay on corporate income. A booming economy in Europe this year leads to an unexpected increase in demand by European consumers for US goods. US consumers suddenly love all things made in Brazil and sharply increase their imports from that country. A housing bubble bursts so that housing prices fall by 20% and new home sales drop sharply.arrow_forwardStock market crashes are often followed by economic downturns. Using a 450 -line diagram, explain how a stock market crash has the potential to lead to a recession in an economyarrow_forwardQ1. Explain how macroeconomics studies the economy in aggregate.arrow_forward
- Use the IS curve to explains what happens to the short-run economy when consumers become pessimistic about the state of the economy and future GDP growth.arrow_forwardList 4 factors that will cause the IS curve to shift to the right.arrow_forwardThe government of Prime Minister Shinzo Abe said it would offer some $15 billion in financing for businesses hit by the novel coronavirus and spend about $4 billion directly to prop up the economy.“As the top priority for the time being, we have to put all our effort into keeping businesses alive,” Mr. Abe said.Still, in a $5 trillion economy, the measures may not be big enough to dig the country out of a big hole. SMBC Nikko Securities economist Junichi Makino said he expected the Japanese economy to shrink at an annualized pace of 5.8% in the January-to-March period following a 7.1% contraction in the last quarter of 2019.Japan is set to offer emergency no-interest loans of about $1,900 to newly jobless people and others in trouble, and the borrowers may not have to pay the money back if they can’t find work. Businesses at risk from the virus can access financing or loan guarantees from the government QUESTIONS: 1. How would the financing plan designed to supports businesses impact the…arrow_forward
- The Canadian government increases its expenditure on goods and services in a time of war or increased international tension, Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run? Real GDP increases and the price level rises. Real GDP decreases and the price level falls. Real GDP increases and the price level falls. Real GDP decreases and the price level risek There is no change in either real GDP or the price level. O000arrow_forwardQuestion 2 Use the AD-AS framework to analyse the short run and long run effects on an economy when the following incidents occur. Analyse each incident separately and begin your analysis with a long run equilibrium. (a) The government decides to cut taxes. \ (b) An increase in oil prices which did not affect the potential output. show diagram please.arrow_forwardConsider the “production” of food, which uses various types of inputs: “labor” (e.g., cooks); “capital” (e.g., restaurants and equipment); and “raw materials” (e.g., ingredients). Suppose that labor accounts for 50% of fast food costs while capital and raw materials account for 25% each. Briefly explain whether each of the following parts are true, false, or uncertain a. If raw material prices double (i.e., increase by 100%) while labor and capital prices are unchanged, then using the same mix of labor, capital, and raw materials will require a 25% increase in expenditures. b. If raw material prices double (i.e., increase by 100%) while labor and capital prices are unchanged, then achieving the same health outcomes (i.e., producing the same amount of “output”) will require a 25% increase in expenditures.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning