Price levelLRASDABயASAD,AD₂AD₁Real GDPSuppose the economy is currently experiencing an inflationary gap, without any government policyintervention, the economy would move from☐ a) C to Bb) B to Ac) A to Ed) E to Ae) C to D

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Answered: Price level LRAS D A B ய AS AD, AD₂ AD₁…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter8: Aggregate Demand And The Powerful Consumer

Section: Chapter Questions

Problem 8DQ

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Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
What is your prediction for the economy when you observe that inventories are taking an unplanned dive? You predict that there will be OA. an expansion O B. a trough O C. a business cycle O D. a recession
H0w d0es price stickiness phen0men0n lead t0 an increase in the sh0rt run level 0f 0utput acc0rding t0 the Keynesians?H0w w0uld y0u define price stickiness ?
Congratulationst You have been appointed an economic policy adviser to the United States, You are told that the economy is significantly abowe futtemplyoment GDP. Based on this inlormation, how can the economy would adjust to reach LR.SR Equilbrium (Classical View)? The economy wilt experience low unemployment rate, pushing wages up, and increasing the pelces of a key input (labor). shatting the sAS to the left (up). The economy will experience high unemployment rate, pushing wages down, and reducing the prices of a key input (labor). shiting the SAS to the right (down). The econoriny wil experience low unemployment rate, decreasing inceme, which will eventually shift the AD to the left. The eooncmy will experience low unemployment rate, pushing wages up, and increasing the prices of a key input (labor), shiting the sAs to the night (down).
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. (a) An increase in government expenditure in infrastructureClick or tap here to enter text.(b) A severe recession occurs in a country, which has been a major importer of thenation’s exports.Click or tap here to enter text.(c) The federal government increases business taxesClick or tap here to enter text.(d) The Central Bank increases the cash interest rate
"H0w w0uld y0u define price stickiness ? H0w d0es this phen0men0n lead t0 an increase in the sh0rt run level 0f 0utput acc0rding t0 the Keynesians?" C0mment
Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
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Theshortrunaggregatesupplycurvewasconstructedassumingthatasthepriceofoutputsincreases,thepriceof inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?

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Price level LRAS D A B ய AS AD, AD₂ AD₁ Real GDP Suppose the economy is currently experiencing an inflationary gap, without any government policy intervention, the economy would move from ☐ a) C to B b) B to A c) A to E d) E to A e) C to D