Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 27, Problem 18APA
To determine
Identify County J have an inflationary gap or recessionary gap and its magnitude.
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Draw an aggregate demand and supply diagram for Japan. In the diagram, show how each of the following affects aggregate demand and supply.
a. The U.S. gross domestic product falls.
b. The level of prices in Korea falls.
c. Labor receives a large wage increase.
d. Economists predict higher prices next year.
What change does recession has on the price and output level when the change in aggregate demand is more than change in aggregate supply ?
Using aggregate demand and aggregate supply, graph the effects on the price level and GDP of each of the following. Draw a large graph and label all axes, initial and final equilibrium points, direction of shift if any, all curves and lines, equilibrium values on the x- and y-axes. State the conclusion in words.
a. A cut in income taxes
b. An increase in military spending
c. A drop in export demand by foreign purchasers
d. An increase in imports
e. A decline in business investment spending
Chapter 27 Solutions
Macroeconomics
Ch. 27.1 - Prob. 1RQCh. 27.1 - Prob. 2RQCh. 27.1 - Prob. 3RQCh. 27.1 - Prob. 4RQCh. 27.2 - Prob. 1RQCh. 27.2 - Prob. 2RQCh. 27.2 - Prob. 3RQCh. 27.3 - Prob. 1RQCh. 27.3 - Prob. 2RQCh. 27.3 - Prob. 3RQ
Ch. 27.3 - Prob. 4RQCh. 27.4 - Prob. 1RQCh. 27.4 - Prob. 2RQCh. 27.4 - Prob. 3RQCh. 27 - Prob. 1SPACh. 27 - Prob. 2SPACh. 27 - Prob. 3SPACh. 27 - Prob. 4SPACh. 27 - Prob. 5SPACh. 27 - Prob. 6SPACh. 27 - Prob. 7SPACh. 27 - Prob. 8SPACh. 27 - Prob. 9SPACh. 27 - Prob. 10APACh. 27 - Prob. 11APACh. 27 - Prob. 12APACh. 27 - Prob. 13APACh. 27 - Prob. 14APACh. 27 - Prob. 15APACh. 27 - Prob. 16APACh. 27 - Prob. 17APACh. 27 - Prob. 18APACh. 27 - Prob. 19APACh. 27 - Prob. 20APACh. 27 - Prob. 21APACh. 27 - Prob. 22APACh. 27 - Prob. 23APACh. 27 - Prob. 24APACh. 27 - Prob. 25APACh. 27 - Prob. 26APA
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- What change does recession has on the price and output level when the change in aggregate demand is less than change in aggregate supply ?arrow_forwardWhich of these will increase aggregate supply? The Environmental Protection Agency (EPA) announces new, tighter standards for lead in dust on floors and windowsills. OThe president raises tariffs on Chinese imports. The president asks Congress for $200 billion for rebuilding roads and bridges. The Secretary of Education finalizes rules that make it more difficult for students to obtain federal loans.arrow_forwardThe following graph shows the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) curves of an economy. PRICE LEVEL 300 270 240 210 180 150 120 90 60 30 0 AD LRAS B SRÁS 0 100 200 300 400 500 600 700 800 900 1000 REAL GDP (Billions of dollars) Point A on the graph shows the state of the economy in a recessionary gap increase aggregate demand and move the economy to point B decrease aggregate demand and move the economy to point C intervene by keeping the economy at point A follow a laissez-faire policy 1 (?) Keynesian economists believe that the government shouldarrow_forward
- If an inflationary gap exists, what will happen to business inventories? How will producers respond?arrow_forwardHow does each of the following infrastructure items affect aggregate supply? courts and prisons.arrow_forwardWhich would most likely increase aggregate supply? An increase in the prices of imported products An increase in productivity A decrease in business subsidies A decrease in personal taxesarrow_forward
- Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves. Assume the central bank in this economy (the Fed) fixes the quantity of money supplied. Suppose the price level decreases from 150 to 125. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. Money Supply 15 12 4 Money Demand 3 5 10 15 20 MONEY (Billions of dollars) INTEREST RATE (Percent) 18 0 0 25 30 Money Demand Money Supply (?) Following the price level decrease, the quantity of money demanded at the initial interest rate of 9% will be supplied by the Fed at this interest rate. As a result, individuals will attempt to bonds and other interest-bearing assets, and bond issuers will realize that they restored in the money market at an interest rate of than the quantity of money their money holdings. In order to do so, they will interest rates until equilibrium isarrow_forwardUse 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.• Consumers expect a recession• Foreign income rises• Foreign price levels fallarrow_forwardMexico is experiencing a collapse in business investment, rising unemployment, and falling consumer spending. Business and consumer confidence are low. Illustrate how business and consumer confidence influence aggregate supply and aggregate demand.arrow_forward
- Which of the following is a major influence on Aggregate Supply? Select one: a. The advice of government b. Consumption c. Government spending d. The quality of the factors availablearrow_forwardWhich of the following causes the aggregate supply curve to shift inward? a. Increase in quantity of labor b. Increase in quantity of capital c. Decrease in GDP d. Decrease in price levelarrow_forwardConsider the economy of Canada. Its households spend 55% of increases in their income and saves 45 %. There are no taxes and no foreign trade. Currently, Canada has a recessionary gap, the governments aim is to get actual output to increase by 220 billion dollars. How much of a tax cut do they need to have to achieve the overall increase in output of 220 billion dollars?arrow_forward
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