Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 8, Problem 16E
To determine
To write:
Reasons of rapidly increasing stock prices lead to growth in real GDP.
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Students have asked these similar questions
For this discussion, imagine that one of the scenarios listed below were to occur:
Foreign countries purchase an unusually large number of U. S. manufactured passenger and military airplanes.
The average U. S. worker has a large increase in productivity.
Federal personal income tax rates are reduced by an average of ten percent.
What impact you think one of these changes in the United States would have on aggregate demand, aggregate supply, and real GDP.
From March 2009 to 2013, the U.S. stock market more than doubled in value. How might this have affected aggregate demand? What happens to aggregate demand when the stock market plunges?
Suppose that consumers become pessimistic about the future health of the economy. What will happen to aggregate demand and to output? What might the president and Congress have to do to keep output stable? What might the Federal Reserve do?
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- Based on the picture, explain what happens to the aggregate demand. Describe your answer.arrow_forwardExplain why the Aggregate demand curve is downward sloping. There are two reasons given in the text. This is a complex concept. Make sure you fully understand before you write your answer. Imagine a fellow student needing help with this concept and explain in a way that would help clarify.arrow_forwardExplain the likely effects of a U.S. boom on the demand for Canadian exports. What would be the effect on Canadian aggregate demand? Suppose the Bank of Canada viewed its monetary policy as being appropriate for keeping GDP of Canada close to potential GDP. What would you then predict to be the Central Bank's response to the foreign boom in U.S.?arrow_forward
- Examine the following policies and determine which would decrease the level of aggregate demand. Decreasing in government spending and decreasing taxes Increasing investment and increasing government spending Increasing consumption and decreasing taxes Decreasing in government spending and increasing in taxesarrow_forwardDiscuss one reason for the downward sloping aggregate demand curve.arrow_forwardRefer to the figure above. If the economy is in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy fromarrow_forward
- Use the dynamic model of aggregate demand and supply to illustrate a situation where the economy is growing but experiencing inflation in the long run.arrow_forwardThe following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to the price level people expected and the quantity of output to the natural level of output. The stock market boom will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in consumption spending associated with…arrow_forward
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