Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Question
Chapter 28, Problem 32APA
To determine
Identify the impacts on Country U and Country J and illustrate graphically.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume the graph represents the Japanese economy during the first quarter of 2014. Use the information from the seventh paragraph of the Washington Post article Japan Recession, Europe Stagnation Cast Pall over Global Economic Outlook to demonstrate how the policies of Prime Minister Shinzo Abe affected the economy in the subsequent quarters of 2014.
The graph depicts aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS). LRAS is sometimes labeled potential output.
REAL GDP (Billions of dollars)
2700
2600
2500
2400
2300
v
1956
1953
1954
1955
YEAR
1957
?
The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed.
PRICE LEVEL (CPI)
180 T
150
140
130
120
110
100
90
80
0
Aggregate Demand
100
200
300 400 500 600
REAL GDP (Billions of dollars)
700
800
(?)
Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply.
A higher price level makes domestically produced goods more expensive than foreign goods.
A lower price level leads to a lower interest rate.
A higher price level decreases consumption through the substitution effect.
As the aggregate price level rises, the purchasing power of households' saving balances will
demanded to
This phenomenon is known as the
effect.
causing the quantity of output
Chapter 28 Solutions
Macroeconomics
Ch. 28.1 - Prob. 1RQCh. 28.1 - Prob. 2RQCh. 28.1 - Prob. 3RQCh. 28.2 - Prob. 1RQCh. 28.2 - Prob. 2RQCh. 28.2 - Prob. 3RQCh. 28.2 - Prob. 4RQCh. 28.3 - Prob. 1RQCh. 28.3 - Prob. 2RQCh. 28.3 - Prob. 3RQ
Ch. 28.4 - Prob. 1RQCh. 28.4 - Prob. 2RQCh. 28.4 - Prob. 3RQCh. 28.4 - Prob. 4RQCh. 28 - Prob. 1SPACh. 28 - Prob. 2SPACh. 28 - Prob. 3SPACh. 28 - Prob. 4SPACh. 28 - Prob. 5SPACh. 28 - Prob. 6SPACh. 28 - Prob. 7SPACh. 28 - Prob. 8SPACh. 28 - Prob. 9SPACh. 28 - Prob. 10SPACh. 28 - Prob. 11SPACh. 28 - Prob. 12SPACh. 28 - Prob. 13SPACh. 28 - Prob. 14SPACh. 28 - Prob. 15APACh. 28 - Prob. 16APACh. 28 - Prob. 17APACh. 28 - Prob. 18APACh. 28 - Prob. 19APACh. 28 - Prob. 20APACh. 28 - Prob. 21APACh. 28 - Prob. 22APACh. 28 - Prob. 23APACh. 28 - Prob. 24APACh. 28 - Prob. 25APACh. 28 - Prob. 26APACh. 28 - Prob. 27APACh. 28 - Prob. 28APACh. 28 - Prob. 29APACh. 28 - Prob. 30APACh. 28 - Prob. 31APACh. 28 - Prob. 32APACh. 28 - Prob. 33APACh. 28 - Prob. 34APA
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.• Consumers expect a recession• Foreign income rises• Foreign price levels fallarrow_forwardA boom may be caused by increase in aggregate demand in an economy. Explain how increase in aggregate demand leads to a rise in national income. (Using circular flow if income).arrow_forwardThe SARB interest rate has been increasing since the beginning of this year. If the Monetary Policy Committee (MPC) decides to grow the economy. What impact does this have on the borrower, on wages and net exports? What is the overall effect on the economy? Use the relevant graphs.arrow_forward
- q. Consider the following scenarios and briefly explain how each scenario would affect price level and real GDP in Canada. Canada’s major trading partners experience severe recession. Canadian dollar depreciates in the foreign exchange market. Major technological breakthroughs lead to significant increase in productivity.arrow_forwardWhat are the key indicators and factors that contribute to the onset of a recession in an economy?arrow_forward2. The theory of liquidity preference and the downward-sloping aggregate demand curve The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixes the quantity of money supplied. Suppose the price level decreases from 90 to 75. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. INTEREST RATE (Percent) 18 15 12 3 0 0 10 Money Supply Money Demand 20 30 40 MONEY (Billions of dollars) 50 60 Money Demand The following graph shows the economy's aggregate demand curve. 0 Money Supply After the decrease in the price level, the quantity of money demanded at the initial interest rate of 9% will be money supplied by the Fed at this interest rate. People will try to and other interest-bearing assets, and bond issuers will find that they new equilibrium at an interest rate of than the quantity of bonds interest rates until the money market…arrow_forward
- Draw an AD-SRAS diagram, where the economy is initially at equilibrium and input prices do not move as quickly as output prices. Imagine a shock hits the economy, and after the shock you see in the data that the inflation rate has decreased in the economy while output has increased. What could have caused the shock? An increase in government spending. An increase in the capital stock An increase in inflation expectations An increase in importsarrow_forwardDefine what economists mean when they use the word: “recession”?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
- The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL (CPI) 160 150 140 130 120 110 100 90 80 0 Aggregate Demand 100 200 300 400 500 REAL GDP (Billions of dollars) 600 700 800 ? Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply. A higher price level makes domestically produced goods more expensive than foreign goods. A lower price level leads to a lower interest rate. A lower price level increases the consumption of complementary goods. As the aggregate price level rises, the purchasing power of households' saving balances will demanded to This phenomenon is known as the effect. , causing the quantity of outputarrow_forwardInterpret the change you drew on the previous graph by filling in the blanks in the following paragraph: The lower-than-expected price level causes firms to earn more profit than they expected on each unit of output they produce, and, therefore, they decrease their production level. At the same time, the real value of wages and other resource prices are lower than workers and firms expected when they signed long-term contracts. As a result, the economy as a whole produces at a level below the unemployment rate is lower than its natural rate. its potential output, and Now, suppose prices remain lower than expected. As a result, in the next round of labor negotiations, unions accept lower wages for their members. The following graph shows the potential output for this economy as well as the same initial short-run aggregate supply curve as in the first graph. Shift one or both of these lines to illustrate how the economy adjusts to a new long-run equilibrium. PRICE LEVEL 180 SRAS 150…arrow_forwardThe following graph plots the aggregate demand curve for this economy. Show the impact of the decrease in the price level by moving the point along the curve or shifting the curve. PRICE LEVEL 300 250 200 150 100 50 0 10 Aggregate Demand 20 30 40 OUTPUT (Billions of dollars) 50 60 The change in the interest rate found in the previous task will lead to a in the quantity of output demanded in the economy. Aggregate Demand in residential and business spending, which will causearrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Survey of Economics (MindTap Course List)EconomicsISBN:9781305260948Author:Irvin B. TuckerPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Survey of Economics (MindTap Course List)
Economics
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning