Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 24, Problem 24.4.4PA
To determine
The movement of potential GDP from 2017 to 2018.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Analyzing Macroeconomic Events with the IS-MP Diagram. Consider the following events in the macroeconomy. Show how to think about them using the IS-MP diagram. For each, explain how and why GDP in the United States is affected in the short run and show how the central bank should respond if it wishes to stabilize output.
(a) The government offers a temporary investment tax credit: for each dollar of investment that firms undertake, they get a credit that reduces the taxes they pay on corporate income.
(b) A housing bubble bursts, so that housing prices fall by 20% and new home sales drop sharply.
(c) A resurgence of growth in Japan leads to an unexpected increase in the demand by Japanese consumers for U.S. goods.
Create a graph that shows where Mexico currently is on the business cycle. Be sure to include an AD-AS Model graph that shows if the economy is currently experiencing a recessionary gap, expansionary gap, or long run equilibrium.
Measuring Yt and Yt : A real-world problem faced by policymakers, forecasters, and businesses every day is how to judge the state of the economy. Consider the table below, showing hypothetical measures of real GDP in the coming years, starting at a level of $18.0 trillion in 2018. Now fill in the remaining columns of the table by answering the following questions. (a) What is potential output in 2018? You could call this a trick question, since there’s no way for you to know the answer! In a way, that’s the main point: fundamentally, we have to take some other measurements and make some assumptions. Suppose your research assistant tells you that in 2018, business surveys, unemployment reports, and recent years’ experience suggest that the economy is operating at potential output. So go ahead and write 18.0 for potential in this year. (b) Assume potential output grows at a constant annual rate of 2.5%, and complete the remainder of the table. (c) Comment on…
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
Knowledge Booster
Similar questions
- Use an aggregate demand and supply diagram to illustrate and explain how each of the following will affect the equilibrium price level and the real GDP. Describe and analyze the new situation (inflationary gap, recessionary gap, stagflation). How should the situation be rectified in order to return to full employment? • Workers expect high future inflation and negotiate higher prices now • Technological improvement increase productivityarrow_forwardPrice level (GDP deflator, 2012=100) What happens in the economy when firms are no longer able to meet the demand for their output? Draw an aggregate demand curve. Label it AD. 135- Draw an aggregate supply curve. Label it AS. 125- Draw a point at the short-run macroeconomic equilibrium. Label it 1. Draw a point on the AS curve at which firms are unable to meet the demand for their output. Label it 2. 115- Prices When firms are unable to meet the demand for their output, 105- A. short-run aggregate supply is greater than long-run aggregate supply; rise 95- O B. the quantity of real GDP demanded is greater than the quantity of real GDP supplied; rise C. aggregate demand is greater than short-run aggregate supply; 85+ 18.0 19.0 20.0 21.0 22.0 rise Real GDP (trillions of 2012 dollars) D. the quantity of real GDP supplied is greater than the quantity of real GDP demanded; >>> Draw only the objects specified in the question. fall Click the graph, choose a tool in the palette and follow the…arrow_forwardSuppose the people of Canada has reduced their spending on goods and services from the United States. What will be the effect on real GDP and the price level in the short run? In the long run? Show your results graphically.arrow_forward
- In what year and quarter did U.S. real GDP first exceed its pre-recession level?arrow_forwardEverything else held constant, which of the following does NOT cause aggregate demand ?to increase :Select one a. an increase in consumer optimism b. an increase in government spending c. an increase in taxes d. an increase in net exportsarrow_forward120- 115- 110- 105- 100- 95- 90- 85+ Price level 1.1 S LAS D B SAS₁ ch SASO AD ADO 1.2 1.3 1.4 1.5 1.6 Real GDP (trillions of 2007 dollars) 1.7arrow_forward
- The accompanying graph displays an Aggregate Demand (AD), Aggregate Supply (AS), and Potential GDP curve. Please illustrate how stagflation can occur in this economy. Potential GDP AS AD Real GDP Price Levelarrow_forwardPlease explain why the long-run aggregate supply curve is vertical. What variable causes the short-run aggregate supply curve to shift? Please identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left. What is the relationship among the AD, SRAS, and LRAS curves when the economy is in macroeconomic equilibrium?arrow_forwardThe government of Australia has embarked on various policies in order to reduce the severity of COVID 19 on the economy. Has COVID 19 caused economic expansion or a recession? Explain your answer using at least two economic effects on the economy of Australiaarrow_forward
- Consider the diagram to the right in the next column. The line represents the economy's growth trend, and the curve represents the economy's actual course of business fluctuations. For each part below, provide the letter label from the portion of the curve that corresponds to the associated term. a.) Using the point drawing tool, indicate a point on the curve that represents a contraction or recession. Label this point A. b.) Using the point drawing tool, indicate a point on the curve that represents a peak. Label this point B. c.) Using the point drawing tool, indicate a point on the curve that represents a trough. Label that point C. d.) Using the point drawing tool, indicate a point on the curve that represents an expansion. Label that point D. Carefully follow the instructions above, and only draw the required objects.arrow_forwardrecognize why economists believe that economic problems such as “shocks” and “sticky prices” are responsible for short-run fluctuations in GDP;arrow_forwardConstruct the AD, SRAS, and LRAS curves for an economy experiencing 1. full employment 2. an economic boom, 3. a recession. What will happen in each case if it's only temporary? What will happen in each case if it's permanent?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education