Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 29, Problem 10IAPA
To determine
To show:
The effect on real
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Please use the AD-AS model to analyze the effects of monetary policy and fiscal policy on economic outcome in an open economy:
a. Please show graphically the shifting of the AD curve after the Fed conducts an expansionary monetary policy in a closed economy (A closed economy means there is no international trade.). How do the price level and the real GDP change?
b. Suppose the economy becomes an open economy. Please revise the result that you get in part (a). Please explain how you get the new result using the AD-AS model.
c. Please show graphically the shifting of the AD curve after the federal government conducts an expansionary fiscal policy in a closed economy. Please show the crowding-out effect. How do the price level and the real GDP change?
d. Suppose the economy becomes an open economy. Please revise the result that you get in part (c). Please explain how you get the new result based on the AD-AS model.
Imagine that in 2050, the dollar depreciates greatly against the euro. Use the ADAS model to explain the likely short run impacts on U.S. GDP and the aggregate price level. What do you anticipate to happen to U.S. consumption expenditures and U.S. employment? Explain your reasoning for each of your predictions and show graphically as appropriate.
Consider the relationship between exchange-rate changes, aggregate demand, and monetary policy.
a. Suppose the world price for raw materials rises, due to a growing demand for these products. On the AD/AS
diagram on the right show the likely effect of this on Canadian aggregate demand, given that Canada is a net
exporter of raw materials and assuming, initially, no change in the exchange rate.
Use the three-point curve drawing tool to draw the new position of the AD curve.
Carefully follow the instructions above, and only draw the required object.
Price Level
Figure 1
Real GDP
AS
AD
G
Chapter 29 Solutions
Foundations of Economics (8th Edition)
Ch. 29 - Prob. 1SPPACh. 29 - Prob. 2SPPACh. 29 - Prob. 3SPPACh. 29 - Prob. 4SPPACh. 29 - Prob. 5SPPACh. 29 - Prob. 6SPPACh. 29 - Prob. 7SPPACh. 29 - Prob. 8SPPACh. 29 - Prob. 9SPPACh. 29 - Prob. 10SPPA
Ch. 29 - Prob. 11SPPACh. 29 - Prob. 1IAPACh. 29 - Prob. 2IAPACh. 29 - Prob. 3IAPACh. 29 - Prob. 4IAPACh. 29 - Prob. 5IAPACh. 29 - Prob. 6IAPACh. 29 - Prob. 7IAPACh. 29 - Prob. 8IAPACh. 29 - Prob. 9IAPACh. 29 - Prob. 10IAPACh. 29 - Prob. 1MCQCh. 29 - Prob. 2MCQCh. 29 - Prob. 3MCQCh. 29 - Prob. 4MCQCh. 29 - Prob. 5MCQCh. 29 - Prob. 6MCQCh. 29 - Prob. 7MCQ
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- If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.arrow_forward18. Using AS-AD diagrams, illustrate each of the following economic situations by showing the patterns and shifts of either AS or AD that could cause them to happen: a. a rise in the price level triggered by higher oil prices; b. a rise in inflation that happens four years in a row because government spending keeps increasing; c. foreign investors gain confidence and increase the level of investment in the U.S. economy; d. the economies of trading partners grow very slowly, leading to a decrease in exports to those countries e. output declines slightly but the price level falls a great deal. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward18. Using AS-AD diagrams, illustrate each of the following economic situations by showing the patterns and shifts of either AS or AD that could cause them to happen: a. a rise in the price level triggered by higher oil prices; b. a rise in inflation that happens four years in a row because government spending keeps increasing; c. foreign investors gain confidence and increase the level of investment in the U.S. economy; d. the economies of trading partners grow very slowly, leading to a decrease in exports to those countries e. output declines slightly but the price level falls a great deal.arrow_forward
- Suppose that the position of a nation's long-run aggregate supply (LRAS) curve has not changed, but its long-run equilibrium price level has decreased. FACTOR a. Afall in the value of the domestic currency relative to other world currencies b. A decrease in the quantity of money in circulation c. An increase in the labor force participation rate d. An increase in taxes e. Afall in real incomes of countries that are key trading partners of this nation f. Increased long-run economic growth Of the factors given above, which could account for the price level decrease with constant LRAS? O A. Factors c and f. O B. Factors b, c, d, and f. O C. Factors b. d. and e. O D. Factors a, c, and f.arrow_forwardQ₁ Which of the following statements about the economic environment of a country are likely indicators 9 that the economy is hyperinflationary? Select one or more correct options and select Submit. Interest rates, wages and prices are linked to a price index. The general population attempts to keep the amount of local currency held at a minimum either through investing in non-monetary assets or, where possible, converting their local currency into the currency of a country with a stable economy. An increase in the number of strikes by members of a labour union. Sales and purchases on credit are priced to compensate for the expected loss in value during the credit period. The cumulative inflation rate over three years is approaching 80%. Submitarrow_forwarduppose a change in exchange rates causes aggregate demand to increase. Which of the following is NOT the result In the long run, the price level will increase. In the short run, GDP will increase. In the short run, the price level will increase. In the long run, GDP will increase. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.arrow_forward
- There are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and unemployment. Export situation gets worse as the foreigners are reluctant to buy expensive goods and the government will make some imports. The borrowing has become easy and loans are issued at a cheaper rate to buy car. Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? A. Widespread fear of recession B. The appreciation in the Pakistani Rupee rate C. A boom in the stock market D. An increase…arrow_forwardThere are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and unemployment. Export situation gets worse as the foreigners are reluctant to buy expensive goods and the government will make some imports. The borrowing has become easy and loans are issued at a cheaper rate to buy car. Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? Widespread fear of recession The appreciation in the Pakistani Rupee rate A boom in the stock market An increase in transfer…arrow_forwardThere are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and unemployment. Export situation gets worse as the foreigners are reluctant to buy expensive goods and the government will make some imports. The borrowing has become easy and loans are issued at a cheaper rate to buy car. Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? show with graph: Widespread fear of recession The appreciation in the Pakistani Rupee rate A boom in the stock marketarrow_forward
- There are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and unemployment. Export situation gets worse as the foreigners are reluctant to buy expensive goods and the government will make some imports. The borrowing has become easy and loans are issued at a cheaper rate to buy car. Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? An increase in transfer payment A decrease in real interest rate in Pakistanarrow_forwardThere are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and unemployment. Export situation gets worse as the foreigners are reluctant to buy expensive goods and the government will make some imports. The borrowing has become easy and loans are issued at a cheaper rate to buy car. Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? also give reasons of every situation!! An increase in transfer payment. A decrease in real interest rate in Pakistan.arrow_forwardThere are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and unemployment. Export situation gets worse as the foreigners are reluctant to buy expensive goods and the government will make some imports. The borrowing has become easy and loans are issued at a cheaper rate to buy car. Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? A boom in the stock market An increase in transfer payment A decrease in real interest rate in Pakistanarrow_forward
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