Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 29, Problem 6MCQ
To determine
To select:
The option that correctly explains the impact of increase in quantity of money by Fed.
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9. Which of the following will shift the aggregate demand curve to the right, ceteris paribus?
A) an increase in interest rates
B) a decrease in disposable income
C) a decrease in expected profits for firms
D) an increase in net exports
10. If the U.S. dollar decreases in value relative to other currencies, how does this affect the
aggregate demand curve?
A) This will move the economy up along a stationary aggregate demand curve.
B) This will move the economy down along a stationary aggregate demand curve.
C) This will shift the aggregate demand curve to the left.
D) This will shift the aggregate demand curve to the right
Refer to the table below.
Real Output Demanded, Billions
Price Level
Real Output Supplied, Billions
$ 506
108
$ 513
508
104
512
510
100
510
512
96
507
514
92
502
Instructions: Enter your anwers as whole numbers.
A). What is the equilibrium level of output? What is the equilibrium price level?
B). Suppose that aggregate demand increases such that the amount of real output demanded rises by $ 7 billion at each price level. Insert the new values for real output demanded in the table below.
Real Output Demanded, Billions
New Real Output Demanded, Billions
Price Level
Real Output Supplied, Billions
$ 506
108
$ 513
508
104
512
510
100
510
512
96
507
514
92
502
What is the new equilibrium level of output?
What is the new equilibrium price level?
By what percentage will the price level increase?
Will this inflation be demand-pull inflation or will it be cost-push inflation?
C) If potential real GDP ( that is, full-employment GDP) is $ 510…
2. Suppose an economy is described by the following aggregate demand and short-run aggregate supply curves. The potential level of output is $10 trillion.
Aggregate Quantity of Goods and Services
Price Level
Demanded
Supplied
3.0
$11.0 trillion
$9.0 trillion
3.4
$10.8 trillion
$9.2 trillion
3.8
$10.6 trillion
$9.4 trillion
4.2
$10.4 trillion
$9.6 trillion
4.6
$10.2 trillion
$9.8 trillion
5.0
$10.0 trillion
$10.0 trillion
5.4
$9.8 trillion
$10.2 trillion
5.8
$9.6 trillion
$10.4 trillion
6.2
$9.4 trillion
$10.6 trillion
6.6
$9.2 trillion
$10.8 trillion
7.0
$9.0 trillion
$11.0 trillion
Draw the aggregate demand and short-run aggregate supply curves.
What is the initial real GDP?
What is the initial price level?
What kind of gap, if any, exists?
After the increase in health-care costs, each level of real GDP requires an increase in the price level of o.8. For
example, producing $9.0 trillion worth of goods and services now requires a price level of 3.8. What is the short-
run equilibrium…
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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