Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 8, Problem 13E
To determine
To write:
The situation when an increase in aggregate
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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:
The U.S. gross domestic product falls.
The level of prices in Korea falls.
Labor receives a large wage increase.
Economists predict higher prices next year.
The following events shift either aggregate demand, aggregate supply, both or neither.
Using a diagram, illustrate the effect of the events on the economy. In particular, explain
the effect of each event on price level, real GDP and equilibrium in the economy.
A) A recent business survey reported that business confidence has declined.
B) Government cuts the rate of personal income tax after a pandemic caused an
economic slowdown.
C) A recent flooding in a small rural region destroyed the potato crop.
D) A booming economy in a neighbouring country has drawn many working age
people (and their families) to emigrate there in search of jobs and better life.
The following events shift either aggregate demand, aggregate supply, both or neither. Using a diagram, illustrate the effect of the events on the economy. In particular, explain the effect of each event on price level, real GDP and equilibrium in the economy.
A) A recent business survey reported that business confidence has declined.
B) Government cuts the rate of personal income tax after a pandemic caused an economic slowdown.
C) A recent flooding in a small rural region destroyed the potato crop.
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Similar questions
- Define aggregate supply. Give three reasons why the aggregate supply curve slopes upward. Explain the determinants of the aggregate supply (AS) and describe how the AS curve will shift when one of these determinants changes.arrow_forwardThe following event has occurred in the history of the United States: The world oil price rises sharply. Explain for event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.arrow_forward"The demand curves for all products have negative slopes. For instance, the demand curves for milk,automobiles, personal computers, and shirts all have negative slopes. Therefore, because the aggregate demand curve shows the demand for all products, it too must have a negative slope. " Comment on this assertion.arrow_forward
- The following graph plots aggregate demand (AD2027AD2027) and aggregate supply (AS) for the imaginary country of Cotopaxi in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will be given by the curve labeled ADAADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate demand in 2028 will be given by the curve labeled ADBADB, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 2027 and 2028, depending on whether the economy moves from the initial price level of 102 to the…arrow_forwardThe aggregate demand curve portrays the relationship between price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.arrow_forwardAre the determinants of aggregate demand the same things that apply to demand for an individual good?arrow_forward
- The curve of Aggregate Demand or aggregate demand has a negative slope. Explain why the aggregate demand curve can have a negative slope.arrow_forwardCreate a graph for a short-run aggregate supply curve. Use the variable ‘Price Level’ for the vertical axis and ‘Real GDP’ for the horizontal axis. Then explain why there is a direct relationship between the price level and real GDP. Use your graph to illustrate your explanation. Also, discuss determinants of Aggregate Supply or factors that shift Aggregate Supply curve.arrow_forwardUse the following graph to answer the following questions. Line Y Price level (P) 100 80 B Line Z Line X2 Line X1 Real GDP (3) If point A occurs chronologically before point B, then this graph could represent a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply. a decrease in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in long-run aggregate supply. an increase in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in short-run aggregate supply.arrow_forward
- Describe the change in aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (In your answer, indicate whether the change will "Decrease" or "Increase" aggregate supply or have no effect.) (a) A rise in the average price of inputs; (b) An increase in worker productivity; (c) Government antipollution regulations become stricter; (d) A new subsidy program is enacted for new business investment in productive equipment; (e) Energy prices decline.arrow_forwardThe following graph shows an aggregate demand curve (AD) illustrating the inverse relationship between the price level and the quantity of Real GDP in the United States. During World War II, the United States increased military spending. Show the effect of the following scenario on the aggregate demand curve by dragging the curve or moving the point to the appropriate position. Note: Tool tip: To move the curve, click and drag any part of the curve. The curve will snap into position, so if you try to move it and it snaps back to its original position, just try again and drag it a little farther. PRICE LEVEL Aggregate Demand I I " I 1 REAL GDP AD AD (?)arrow_forward
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