Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 27, Problem 4SPA
To determine
Identify the impact of cut in the quantity of money on aggregate
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What happens to the aggregate demand curve when the Fed reduces the money supply
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aggregate demand in the short run.
An increase in the quantity of money.
A. increases aggregate demand
B. decreases aggregate demand
C. decreases the quantity of real GDP demanded but aggregate demand does not change
D. increases the quantity of real GDP demanded but aggregate demand does not change
Have you ever borrowed money to buy a car, pay tuition, or for any other purpose? In what form did you receive the money? How did your loan affect the money ? Aggregate demand
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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- Statistics Canada reported that in the second quarter of 2017 Canadian exports increased by $14 billion. Explain and draw a graph to illustrate the effect of an increase in exports on equilibrium real GDP in the long run. Exports increase by $14 billion and the aggregate demand curve shifts to AD ₁. Draw a point at the new short-run equilibrium. Label it 1. Draw a point at the new long-run equilibrium. Label it 2. 150- 145- 140- 135- 130- 125- 120- 115- Price level (GDP deflator, 2007 = 100) LAS 115 SAS 110- 105- 100- 95- 1600 90+ 1520 1540 1560 1580 1600 1620 1640 1660 1680 1700 11 Real GDP (billions of 2007 dollars) ADO AD₁ >>> Draw only the objects specified in the question.arrow_forwardFind the aggregate supply when the aggregate demand is given as $888 billion.arrow_forwardThe graph below shows the long-run aggregate supply (LRAS), the short-run aggregate supply (SRAS), and aggregate demand (AD) curves for a given economy. LRAS 10 Manipulate the curves to show the long run effect of an increase in money supply. 9. SRAS 8. In the long run, an increase in the money supply will result in the following. 6. Real GDP: 3 AD 1 0. 01 1 4 6. 8. 6. 10 Real GDP The aggregate price level decreases stays the same increases 2. 7, 5. Aggregate price levelarrow_forward
- How does an increase in aggregate demand affect output, unemployment, and the price level in the short run?arrow_forwardExplain how an increase in a price level will affect the demand for money and the aggregate demand. Use relevant graphs to support your answer.arrow_forwardExplain the difference between long run and short run aggregate supply. Why do economists distinguish between the two?arrow_forward
- Explain what will happen as a result of the following events. In each case, draw an aggregate demand and short-run aggregate supply diagram showing the initial equilibrium output level (YO) and price level (PO). Show any changes, indicate the final equilibrium output level and price level and explain briefly. a. The economy is in a recession. An increase in government purchases occurs. The Fed tries to maintain the interest rate. b. The economy is operating near full capacity. Now environmental pollution standards are tightened substantially.arrow_forwardThe graph below shows the long-run aggregate supply (LRAS), the short-run aggregate supply (SRAS), and aggregate demand (AD) curves for a given economy. Manipulate the curves to show the long run effect of an increase in money supply. In the long run, an increase in the money supply will result in the following.arrow_forwardThe graph shows the long-run aggregate supply (LRAS), short-run aggregate supply (SRAS), and aggregate demand (AD) curves for a given economy. Manipulate the curves to show the short-run effect of an increase in money supply. Look at images to solve for thisarrow_forward
- Suppose there is an increase in aggregate demand. If the fed want toarrow_forwardThe slope and position of the long-run aggregate supply curve Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The size of the labor force The level of technological knowledge The price level The quantity of physical capitalarrow_forwardWhy does the aggregate demand curve slope downward?arrow_forward
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