Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 16, Problem 2WNG
To determine
Effects of over estimation in the short run and long run.
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Illustrate graphically what would happen in the short run and in the long run to the price level and Real GDP if individuals hold rational expectations, prices and wages are flexible, and individuals overestimate the rise in aggregate demand (bias upward).
What effects would each of the following have on aggregate demand or aggregate supply? Justify your answer. In each case use a diagram to show the expected effects on the equilibrium price level and real output level in the economy. Assume that all other things remain constant and prices are inflexible downward.
(a) A reduction in interest rates at each price level
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Price
D.
Quantity
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
The equilibrium will be at point C before the change in expectations and point A after the
a
change
The equilibrium will be at point A before the change in expectations and point B after the
b
change
The equilibrium will be at point A before the change in expectations and point C after the
change
The equilibrium will be at point E before the change in expectations and point C after the
d
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Chapter 16 Solutions
Macroeconomics
Ch. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.3 - Prob. 1STCh. 16.3 - Prob. 2STCh. 16.3 - Prob. 3STCh. 16.5 - Prob. 1STCh. 16.5 - Prob. 2STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QP
Ch. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNGCh. 16 - Prob. 4WNGCh. 16 - Prob. 5WNG
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