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 20, Problem 6RQ
To determine
The reason for a change in the foreign real interest rate leads to shift of the AD curve.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Use the AD/AS framework to explain how the economy adjusts in the short run and the long run to each of the following (assuming that the economy starts at potential GDP with no
spare Capacity and a given price level):
a) World energy prices rise and then settle at a new higher level, and this raises input prices for all domestic producers.
b) There is a one-off fall in export demand which stays at the new lower level. c) The monetary policy makers lower their official interest rate and hold it at the new lower level.
d)The government raises its current spending and keeps it at the new level.
e)Say what might have happened to the other components of aggregate demand when the economy has adjusted to the change In d) in the long run.
Q12
Use the graph below to answer the question
If South Africa were to discover a plentiful supply of cheap oil, this would:
Select one:
A. move the AS curve to the right.
B. move the AD curve to the right.
C. move the AD curve to the left.
D. move the AS curve to the left.
The graph below shows the AD-AS diagram for the US. How big is the inflationary gap?
Chapter 20 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?arrow_forwardWhat are the automatic adjustment mechanisms for current account imbalances under the classical and Keynesian views?arrow_forwardKeynes notes that when looking at aggregate demand (AD), there are two factors that can cause shifts in import and export demand. Which of the following would be such a factor? A,B,C, OR D ONE ASNWER A Changes in populations B Changes in relative growth rates between countries C Changes in the discount rate D Changes in savings behaviorarrow_forward
- Use the AD/AS model to explain the likely short run impacts on US GDP and the aggregate price level. What do you anticipate will happen to US consumption expenditure and US employment?arrow_forwardRecent economic reports forecast an increase in the interest rate, which likely increases households' desire to save more and decreases business willingness to invest. Use the AD/AD model to show the effects of an increase in the interest rate on the equilibrium Real GDP and Price index?arrow_forwardSuppose after five years of sluggish growth, the economy of the European Union picks up speed. What would be the likely impact on the U.S. trade balance, GDP, and employment?arrow_forward
- How is long-term growth illustrated in an AD/AS model?arrow_forwardWhat would be the impact of an appreciating currency on aggregate demand? a) Decrease b) Increasearrow_forwardHow is long-term growth illustrated in an AD/AS model? Draw a graph of the AD/AS model and show the effect of long-term growth from period 1 to period 2. Include the effect of a resulting expansion of the money supply by the Fed.arrow_forward
- The Keynesian view of the AD/AS model states that when beginning from potential output equilibrium, any decrease in AD will : Group of answer choices a Decrease real output and decrease prices b Decrease real output and increase prices c Decrease real output and do not affect prices d Increase real output and decrease pricesarrow_forwardSuppose that the AD-SRAS-LRAS diagram for the economy is starting in a long-run equilibrium. Now if there is a recession in a trading partner country, which causes domestic aggregate demand to fall. What happens to the domestic output and the price level in the short run and long run, respectively? Elaborate on your answers in words.arrow_forwardExplain how unemployment and inflation impact the AD/AS model.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 (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning