Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 8, Problem 3WNG
(a)
To determine
Estimate the short-run effect on real GDP and the price level.
(b)
To determine
A decrease in the aggregate short-run aggregate supply (SRAS curve is greater than the increase in SRAS:
(c)
To determine
An increase in the short-run aggregate supply (SRAS curve is less than the increase in aggregate demand:
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Students have asked these similar questions
Which of the following would NOT cause a shift in AD?
Select one:
a. A reduction in interest rates
b. A fall in the cost of production
c. A reduction in income tax
d. An increase in government spending
Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves.
Assume the central bank in this economy (the Fed) fixes the quantity of money supplied.
Suppose the price level decreases from 150 to 125.
Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money.
Money Supply
15
12
4
Money Demand
3
5
10
15
20
MONEY (Billions of dollars)
INTEREST RATE (Percent)
18
0
0
25
30
Money Demand
Money Supply
(?)
Following the price level decrease, the quantity of money demanded at the initial interest rate of 9% will be
supplied by the Fed at this interest rate. As a result, individuals will attempt to
bonds and other interest-bearing assets, and bond issuers will realize that they
restored in the money market at an interest rate of
than the quantity of money
their money holdings. In order to do so, they will
interest rates until equilibrium is
Which of the following would not increase Aggregate Demand?
a. Increased Consumption
b. Increased Government Expenditure
c. Increased Investment Expenditure
d. Decrease in the overall price level
Chapter 8 Solutions
Macroeconomics
Ch. 8.2 - Prob. 1STCh. 8.2 - Prob. 2STCh. 8.2 - Prob. 3STCh. 8.3 - Prob. 1STCh. 8.3 - Prob. 2STCh. 8.3 - Prob. 3STCh. 8.5 - Prob. 1STCh. 8.5 - Prob. 2STCh. 8 - Prob. 1QPCh. 8 - Prob. 2QP
Ch. 8 - Prob. 3QPCh. 8 - Prob. 4QPCh. 8 - Prob. 5QPCh. 8 - Prob. 6QPCh. 8 - Prob. 7QPCh. 8 - Prob. 8QPCh. 8 - Prob. 9QPCh. 8 - Prob. 10QPCh. 8 - Prob. 11QPCh. 8 - Prob. 12QPCh. 8 - Prob. 13QPCh. 8 - Prob. 14QPCh. 8 - Prob. 15QPCh. 8 - Prob. 16QPCh. 8 - Prob. 17QPCh. 8 - Prob. 18QPCh. 8 - Prob. 19QPCh. 8 - Prob. 20QPCh. 8 - Prob. 21QPCh. 8 - Prob. 1WNGCh. 8 - Prob. 2WNGCh. 8 - Prob. 3WNGCh. 8 - Prob. 4WNGCh. 8 - Prob. 5WNGCh. 8 - Prob. 6WNG
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Similar questions
- Will the shift of SRAS to the right tend to make the equilibrium quantity and price level higher or lower? What about a shift of SRAS to the left?arrow_forwardUse an aggregate supply (upsloping range) and aggregate demand diagram to demonstrate the effect of each of the following. For each problem state the determinant and what happens to the price level and RGDP. 7. Productivity rises.arrow_forwardDiagrammatically represent the effect on the price level and real GDP in the short run of each of the following : a. An increase in wealth b.an increase in wage rates C. An increase in labour productivityarrow_forward
- The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as shown in Table below. Price Level 100 120 140 160 180 AD 700 600 500 400 300 AS 200 325 500 570 620 a. Plot the AD/AS diagram with the axes labeled. Identify the equilibrium. b. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. c. How will the shift in AD affect the original output, price level, and employment?arrow_forwardOnly a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve. a. True b. Falsearrow_forwardConsider the table on the right, which shows business investment in inventories for each quarter from the first quarter of 2007 to the first quarter of 2012, measured in millions of 2007 dollars. Provide a macroeconomic explanation for this pattern. (Hint: When did the recession during this period begin and end?) The negative growth of inventories indicates a period of OA. inflation since inventories needed to be reduced in the face of increasing storage cost OB. recession because demand was met by drawing down past inventories and production did not increase. OC. recovery since inventories needed to be used to meet demand. OD. recession because inventories increased due to lack of demand Year 2007 2008 2009 2010 2011 2012 2013 Quarter Q1 308889 Q2 Q3 Q4 R288828 Q1 Q2 Q3 Q4 Q1 228892889 Q2 Q3 Q4 Q1 Q2 Inventory Investment (millions of 2007 dollars) $3360 - 2822 15,570 19,644 6061 9512 11,856 4699 -2364 7779 -4807 - 4807 2663 2508 4841 -6805 8965 12,153 6462 2179 2061 7298 14,091 3875…arrow_forward
- Which of the following is a major influence on Aggregate Supply? Select one: a. The advice of government b. Consumption c. Government spending d. The quality of the factors availablearrow_forwardSuppose firms are optimistic about the outlook of the economy and they decide to increase investment. Also suppose that, simultaneously, there is a reduction in business taxes. Use the AD-AS graph to show what happens to the price level and output as a result.arrow_forwardSuppose the economy experiences a "supply shock" due to a fall in oil prices. As a result, the economy experiences a/an ___________in the price level and a/an _______in the level of output(GDP) Group of answer choices Decrease; decrease Increase; increase Decrease; increase Increase; decreasarrow_forward
- Use an aggregate supply (upsloping range) and aggregate demand diagram to demonstrate the effect of each of the following. For each problem state the determinant and what happens to the price level and RGDP. 8. Labor strikes cause an interruption in shipments of parts. 9. Increased graduation rates for schools lead to more-skilled workforce. 10. Stock and bonds markets soar.arrow_forwardUsing an AD/AS diagram (starting from long-run/full employment equilibrium), graphically show and verbally describe how each of the following events would affect the U.S. economy's equilibrium real GDP and price level. a. Discovery and implementation of new technology b. Mexico's economic growth increases faster than ours c. There is a general increase in the price of raw materials e. The cost of labor (wages) rises g. The price of oil is expected to fall d. The number of workers in the labor force decreases due to pandemic retirements/death f. A new Congress decreases government spending h. Consumer confidence fallsarrow_forward
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