Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 24, Problem 24.2.7PA
To determine
The menu cost and the effect of eliminating the menu cost on SRAS.
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Students have asked these similar questions
The following graph shows an increase in short-run aggregate supply (SRAS) in a hypothetical economy. Specifically, short-run aggregate supply
shifts to the right from SRAS₁ to SRAS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion.
Review the graph and then complete the table that follows.
PRICE LEVEL
200
175
150
125
100
75
50
25
0
0
50
SRAS
SRAS₂
100 150 200 250 300 350 400
REAL GDP (Billions of dollars)
?
The following table lists several determinants of short-run aggregate supply. Complete the table by indicating the change needed in each determinant
to increase short-run aggregate supply.
Determinant
Change Needed to Increase SRAS
Input Prices
increase or decrease
Burdensome Regulations increase or decrease
Technology
decline or improvement
The following graph shows an increase in aggregate supply (ASAS) in a hypothetical economy. Specifically, aggregate supply shifts to the right from AS1AS1 to AS2AS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion.
The following table lists several determinants of aggregate supply. Complete the table by indicating the changes in the determinants necessary to increase aggregate supply.
Determinant
Change Needed to Increase ASAS
Nominal Wage Rate
Tax Rates
Technology
Identify and briefly discuss the three reasons the aggregate demand curve slopes downward. Are these reasons the same as the reasons that the demand curve for an individual product, such as bananas, slopes downward? Briefly explain.
Chapter 24 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 24 - Prob. 24.1.1RQCh. 24 - Prob. 24.1.2RQCh. 24 - Prob. 24.1.3RQCh. 24 - Prob. 24.1.4PACh. 24 - Prob. 24.1.5PACh. 24 - Prob. 24.1.6PACh. 24 - Prob. 24.1.7PACh. 24 - Prob. 24.1.8PACh. 24 - Prob. 24.1.9PACh. 24 - Prob. 24.1.10PA
Ch. 24 - Prob. 24.2.1RQCh. 24 - Prob. 24.2.2RQCh. 24 - Prob. 24.2.4RQCh. 24 - Prob. 24.2.5RQCh. 24 - Prob. 24.2.6PACh. 24 - Prob. 24.2.7PACh. 24 - Prob. 24.2.8PACh. 24 - Prob. 24.2.9PACh. 24 - Prob. 24.2.10PACh. 24 - Prob. 24.2.11PACh. 24 - Prob. 24.2.12PACh. 24 - Prob. 24.2.13PACh. 24 - Prob. 24.2.14PACh. 24 - Prob. 24.2.15PACh. 24 - Prob. 24.3.1RQCh. 24 - Prob. 24.3.2RQCh. 24 - Prob. 24.3.3RQCh. 24 - Prob. 24.3.4PACh. 24 - Prob. 24.3.5PACh. 24 - Prob. 24.3.6PACh. 24 - Prob. 24.3.7PACh. 24 - Prob. 24.3.8PACh. 24 - Prob. 24.3.9PACh. 24 - Prob. 24.3.10PACh. 24 - Prob. 24.4.1RQCh. 24 - Prob. 24.4.2RQCh. 24 - Prob. 24.4.3RQCh. 24 - Prob. 24.4.4PACh. 24 - Prob. 24.4.5PACh. 24 - Prob. 24.4.6PACh. 24 - Prob. 24.4.7PACh. 24 - Prob. 24.4.8PACh. 24 - Prob. 24.4.9PACh. 24 - Prob. 24.4.10PACh. 24 - Prob. 24.2RDECh. 24 - Prob. 24.1CTECh. 24 - Prob. 24.2CTE
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Similar questions
- The following graph shows the short-run and long-run aggregate supply curves (SRAS and LRAS) for an economy. Suppose there is a technological improvement that allows firms to reduce their costs of production permanently. Drag one or both of the curves on the graph to illustrate the long-term effects of this change. If you don't believe there will be any long-term effects, leave the curves where they are. 240 LRAS SRAS 200 SRAS 160 LRAS 120 80 40 6 12 18 24 REAL GDP (Trillions of dollars) Assuming aggregate demand is not affected by the technological improvement, the long-run effect of this v supply shock is v in aggregate output and v in the price level. PRICE LEVELarrow_forwardThe following graph shows an aggregate demand curve (AD) illustrating the inverse relationship between the price level and the quantity of Real GDP in the United States. During World War II, the United States increased military spending. Show the effect of the following scenario on the aggregate demand curve by dragging the curve or moving the point to the appropriate position. Note: Tool tip: To move the curve, click and drag any part of the curve. The curve will snap into position, so if you try to move it and it snaps back to its original position, just try again and drag it a little farther. PRICE LEVEL Aggregate Demand I I " I 1 REAL GDP AD AD (?)arrow_forwardThe following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of output demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of output demanded rises to $500 billion. 170 160 150 A 140 130 B 120 110 AD 100 90 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars) As the price level falls, the cost of borrowing money will causing the quantity of output demanded to This phenomenon is known as the effect. Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore and the number of foreign products purchased by domestic consumers and firms (imports) will Net exports will therefore causing the quantity of domestic output demanded to . This phenomenon…arrow_forward
- The following graph plots aggregate demand (AD2027AD2027) and aggregate supply (AS) for the imaginary country of Cotopaxi in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will be given by the curve labeled ADAADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate demand in 2028 will be given by the curve labeled ADBADB, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 2027 and 2028, depending on whether the economy moves from the initial price level of 102 to the…arrow_forward"The demand curves for all products have negative slopes. For instance, the demand curves for milk,automobiles, personal computers, and shirts all have negative slopes. Therefore, because the aggregate demand curve shows the demand for all products, it too must have a negative slope. " Comment on this assertion.arrow_forwardWhat are the four reasons why aggregate demand curves might shift? Briefly explain each one of them.arrow_forward
- If aggregate supply is vertical, what role does aggregate demand play in determining output ? In determining the price level ? Briefly explain.arrow_forwardGraphically illustrate the long-run aggregate supply curve. Explain how you derive this curve with at least 200 words.arrow_forwardThe following event has occurred in the history of the United States: The world oil price rises sharply. Explain for event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.arrow_forward
- The following table lists several determinants of aggregate supply. Fill in the table by indicating the changes in the determinants necessary to increase aggregate supply. Determinant Prices of Nonlabor Inputs Productivity Nominal Wage Rate Change Needed to Increase Short-Run Aggregate Supplyarrow_forwardThe following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion. The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change needed to decrease AD Wealth (increase/ decrease) Taxes (increase/ decrease) Expected rate of return on investment (increase/ decrease) Incomes in other countries (increase/ decrease)arrow_forwardBriefly explain how each of the following events would affect the aggregate demand curve a) an increase in the price level b) an increase in government purchases c) higher federal corporate income taxesarrow_forward
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