Macroeconomics
13th Edition
ISBN: 9781337617444
Author: Roger A. Arnold
Publisher: Cengage
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Chapter 9, Problem 15QP
To determine
Explain the
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The short-run economic outcome resulting from the increase in production costs is known as——-
Suppose now that the government immediately pursues an accommodative policy by increasing government purchases in response to the short-run impact of the higher oil prices.
In the long run, given that the government pursues accommodative policy, the output level in the economy will equal ——- level will equal———
The graphs illustrate an initial equilibrium for the economy. Suppose that the government increases spending.
Use the graphs to show the new positions of aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS) in both the short run and the long run, as well as the short‑run and long‑run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Adjust the graph.
explain the second image as well and which is right.
Consider an economy that uses exclusively labor and capital to produce.Suddenly, the government of the economy plans to permanently increase the level ofgovernment purchases. Please use words and figures to illustrate your answers.(1) Suppose the economy is a closed one. How does the long-run GDP of the economychange because of the increased government purchases?
(2) Will your answer to (1) be changed if the economy is an open one? Explain youranswers briefly.(3) Suppose the economy is a closed one. Will the increased government purchaseschange the equilibrium interest rate?
Chapter 9 Solutions
Macroeconomics
Ch. 9.1 - Prob. 1STCh. 9.1 - Prob. 2STCh. 9.1 - Prob. 3STCh. 9.2 - Prob. 1STCh. 9.2 - Prob. 2STCh. 9.2 - Prob. 3STCh. 9.3 - Prob. 1STCh. 9.3 - Prob. 2STCh. 9.3 - Prob. 3STCh. 9 - Prob. 1QP
Ch. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 9QPCh. 9 - Prob. 10QPCh. 9 - Prob. 11QPCh. 9 - Prob. 12QPCh. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Prob. 16QPCh. 9 - Prob. 17QPCh. 9 - Prob. 18QPCh. 9 - Prob. 1WNGCh. 9 - Prob. 2WNGCh. 9 - Prob. 3WNGCh. 9 - Prob. 4WNGCh. 9 - Prob. 5WNGCh. 9 - Prob. 6WNGCh. 9 - Prob. 7WNG
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- The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of output demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of output demanded rises to $500 billion. 170 100 180 140 130 120 110 AD 100 00 100 200 300 400 B00 700 OUTPUT (Billians of dollars) As the price level falls, the cost of borrowing money will , causing the quantity of output demanded to Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore and the number of foreign products purchased by domestic consumers and firms (imports) will Net exports will therefore causing the quantity of domestic output demanded toarrow_forwardIn long-run macroeconomic equilibrium, aggregate quantity demanded equals aggregate quantity supplied equals potential GDP. Select one: True Falsearrow_forwardThe following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports.arrow_forward
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