Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 14, Problem 6P
To determine
(a)
To illustrate:
The recessionary gap on the provided diagram.
To determine
(b)
To explain:
The final long-run equilibrium with the help of diagram.
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If the economy had been operating at a full- employment equilibrium, a. Describe the macroeconomic equilibrium after the rise in consumer spending. b. Explain and draw a graph to illustrate how the economy can adjust in the long run to restore a full-employment equilibrium. The magazine Women of China reported that Chinese women in big cities spent 63% of their income on consumer goods last year, up from a meager 26% in 2007. Clothing accounted for the biggest chunk of that spending, at nearly 30%, followed by digital products such as cell phones and cameras (11%) and travel (10%). Chinese consumption as a whole grew faster than the overall economy in the first half of the year and is expected to reach 42% of GDP by 2020, up from the current 36%.
If the economy goes into a recessionary gap, a.) How will the change in wages affect short run AS and why?b.) As short run AS adjusts, what will happen to price level P and spending for output AD?c.) When will the adjustments in the labor market, wages, and AS stop and why?
You will use the aggregate demand and supply model to analyze the economy.
a. Draw the Aggregate Demand (AD), the Short-Run Aggregate Supply curves (SRAS) in one diagram.
Make sure you label the axis and each line. Call the initial equilibrium Y1, P1.
b. We observe an increase in aggregate demand. Illustrate this increase in your graph. Call the new equilibrium Y2, P2
can you please make the graph
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
Chapter 14 Solutions
Exploring Macroeconomics
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Similar questions
- Explain business response towards recessionary pressures in the economy.arrow_forwardA number of macroeconomic variables decline during recessions. One of these variables is the GDP. 1. What other variables, besides real GDP, tend to decline during recessions? Given the definition of real GDP and its components, explain the declines in these economic variables which are to be expected. 2. Empirical studies indicate that the long-run trend in real GDP of the USA has an upward trend. How is this possible given business cycles and macroeconomic fluctuations? What factors explain the upward trend in spite of the cycles?arrow_forwardIf the economy is in equilibrium, how can a recessionary gap exist, and how will producers respond to this gap?arrow_forward
- How is recession illustrated in an AD/AS model?arrow_forwardc. If aggregate demand shifts right, what is equilibrium output? d. if aggregate demand shifts left, what is equilibrium output?arrow_forwardTopic 2. Discuss characteristics of an economy that helps itself correct from a recessionary gap.arrow_forward
- Which of the following shifts aggregate supply to the right? a. a decline in the price of imported natural resources b. a technological advance c. an older labor force that leaves jobs less frequently d. All of the above are correct.arrow_forwardThe image attached, is a screen shot of the question. The question is: If the marginal propensity to consume was 0.8, low large would each of the following need to be in order to restore full-employment equilibrium? A. A tax increase ________billion B. A government spending cut $_________billion C. A cut in income transfers $________billion. I need to know how to figure this out. Again the screen shot of the question with the graph it attached.arrow_forwarda. What are the short-run equilibrium real GDP and price level in 2019?b. What is the long-run equilibrium real GDP?c. Is the short-run macroeconomic equilibrium a full-employment equilibrium, belowfull-employment equilibrium, or above full-employment equilibrium?d. In transition to the long run, how would the wages in this economy change?e. Following from d, explain how would the short run supply curve move to its long runposition, as the changes in the nominal wages take effect.f. What will the long run price level be?arrow_forward
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