Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 8, Problem 6E
To determine
(a)
The several factors that cause the
To determine
(b)
To illustrate:
The effect of a change in each determinant.
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There are several determinants of aggregate supply that can cause the aggregate supply curve to shift.
a. Describe those determinants and give an example of a change in each.
b. Draw and label an aggregate supply diagram that illustrates the effect of the change in each determinant.
The curve of Aggregate Demand or aggregate demand has a negative slope. Explain why the aggregate demand curve can have a negative slope.
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.
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- 4. Draw an ADAS graph at equilibrium. Suppose there is widespread fear of a recession. Which curve will shift? Draw the new equilibrium. Video Helparrow_forwardDefine 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_forward8. Do the following events have their initial impact on aggregate demand, long run aggregate supply, or short run aggregate supply? Do the curves shift to the right or to the left? Show, using a graph for each question. a. The new government in Canada increases income taxes. AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: b. There has been an increase in investment in postsecondary education in Canada AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: c. Canada experiences downward pressure on nominal wages. AD/AS/LRAS: Equilibrium Price:, Equilibrium Quantity: 9 6arrow_forward
- Draw an aggregate demand and supply diagram for Japan. In the diagram, show how each of the following affects aggregate demand and supply. a. The U.S. gross domestic product falls. b. The level of prices in Korea falls. c. Labor receives a large wage increase. d. Economists predict higher prices next year.arrow_forwardWhich of the graphs represents the state of the economy before this pronouncement? Graph A Graph B True or False: President Roosevelt was trying to decrease aggregate supply. O True Falsearrow_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_forward
- Fluctuations in employment over the business cycle bring fluctuations in real gross domestic product (GDP). However, these changes in real GDP are fluctuations around potential GDP. It is not changes in potential GDP and long-run aggregate supply." In terms of the above statement examine the two main factors affecting the aggregate supply curve. Use a diagram to motivate your answer.arrow_forwardAre the determinants of aggregate demand the same things that apply to demand for an individual good?arrow_forwardThe new home market tends to be highly cyclical. Prices and home sales depend on the broader economy, including interest rates and personal income, among many other factors. Determine the affect of each of the following on the market for new homes including new home sales and the price of new homes. While you do not need to turn in a supply and demand diagram, you may wish to still draw one to assist you in answering the following questions. Mortgage interest rates increase Select one: a. Quantity increases and price increases b. Quantity increases and price decreases c. Quantity decreases and price increases d. Quantity decreases and price decreasesarrow_forward
- The new home market tends to be highly cyclical. Prices and home sales depend on the broader economy, including interest rates and personal income, among many other factors. Determine the affect of each of the following on the market for new homes including new home sales and the price of new homes. While you do not need to turn in a supply and demand diagram, you may wish to still draw one to assist you in answering the following questions. Mortgage interest rates increase Select one: a.Quantity increases and price increases b.Quantity increases and price decreases c.Quantity decreases and price increases d.Quantity decreases and price decreases A robust economic expansion raises personal incomes Select one: a.Quantity increases and price increases b.Quantity increases and price decreases c.Quantity decreases and price increases d.Quantity decreases and price decreases There is a shortage of copper pipes and wiring. Select one: a.Quantity increases and price increases b.Quantity…arrow_forwardWhat would be the effect of an unexpected increase in the price of oil on a graph showing aggregate demand and short-run aggregate supply that is initially in equilibrium? The effect of an unexpected increase in the price of oil will be for the A. aggregate demand curve to shift down. B. aggregate demand curve to shift up. C. short-run aggregate supply curve to shift up. D. short-run aggregate supply curve to shift down. The new equilibrium will be where A. the new short-run aggregate supply curve interects the original aggregate demand curve. B. the original short-run aggregate supply curve interects the original aggregate demand curve. C. the new short-run aggregate supply curve interects the original short-run aggregate supply curve. D. the new short-run aggregate supply curve interects a new aggregate demand curve.arrow_forwardExplain why the following statements are false.a. “The aggregate-demand curve slopes downwardbecause it is the horizontal sum of the demandcurves for individual goods.”b. “The long-run aggregate-supply curve is verticalbecause economic forces do not affect long-runaggregate supply.”arrow_forward
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