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- The country of Merryville has an unemployment rate that is greater than the natural rate of unemployment. Using a correctly labeled graph of aggregate demand and aggregate supply, show the current equilibrium real gross domestic product, labeled YC, and price level in Merryville, labeled PLC. The president of Merryville is receiving advice from an economic adviser who advises the president to decrease personal income taxes. How would such a decrease in taxes affect aggregate demand? Explain. The government of Merryville increases spending on goods and services by $200 billion, which is financed by borrowing. If the marginal propensity to consume in Merryville is 0.75: Calculate the multiplier What is the maximum possible change in real gross domestic product (GDP) that could result from the $200 billion increase in government spending?Suppose the economy produces real GDP of $45 billion when unemployment is at Its natural rate. Use the purple points (diamond symbols) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. PRICE LEVEL 132 128 124 120 116 112 108 104 100 0 10 20 30 40 50 60 70 80 REAL GDP (Billions of dollars) LRAS Help Clear All In the table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve. Note: While economic growth generally shifts the LRAS curve to the right, some circumstances can shift it to the left. Event A scientific breakthrough significantly increases food production per acre of farmland. A government-sponsored training program increases the skill level of the workforce. The government allows more immigration of working-age adults. LRAS Curve Shifts to the... Right Left kThe following graph shows an aggregate demand (AD) curve and a short-run aggregate supply (SRAS) curve for an economy. Suppose the economy is initially in a short-run equilibrium at PE, and Real GDP is 25trillion. At some point, the economy experiences a decrease in wage rates. Adjust the following graph to show the effect of a decrease in wage rates on the economy. Price Level 0 5 10 I | 1 15 20 25 30 35 Real GDP (Trillions Dollars) SRAS AD 40 45 50 AD SRAS
- Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose potential GDP (LRAS) equals to $2,700 are given by the table. Now suppose aggregate demand increases by $700 at each price level; for example, the new aggregate demanded at a price level of 50 now equals to $4,200. How will the shift in AD change the original output, price level, and employment? Name one factor that can cause the increase in aggregate demand and the shifting of the curve.The figure below is a part of the AD-AS model as a description of the current situation of an economy. PA=$10 P YA=4000 Y a) Find the short-run equilibrium (i.e. the real output and the price level thereof) of this economy. b) If the natural level of output is 3500, which one will be higher, the unemployment rate at point A, or the natural unemployment rate? Explain. c) Give two reasons as to why the short-run aggregate supply is upward sloping. d) Suppose the government takes no action about the situation indicated above. Explain, with the help of a figure properly labeled, what will happen in this economy in the long run. e) Describe the two kinds of macroeconomic policies that can be used in the situation described before part c). Indicate clearly in your description whether each policy is to the aggregate demand or aggregate supply or Further, give reason(s) as to why the government may want to use these policies rather than doing nothing.The Canadian government passes a series of tax cuts into law in order to counteract a recession they have been experiencing. All else equal, illustrate the effects of this change in government policy on the aggregate demand curve by shifting it in the appropriate direction. Provide your answer below: Price Level Aggregate Supply Aggregate Demand Real GDP
- a. Potential GDP (LAS) is $200 then there is a(n) [(Click to select) b. Potential GDP (LAS) is $800 then there is a(n) [(Click to select) c. Potential GDP (LAS) is $850 then there is a(n) [(Click to select) gap of $ gap of $ gap of $Explain fully how the equilibrium output, income, and employment are determined in the Keynesian model. Illustrate with an appropriate graph.Suppose the full-employment level of real output (Q for a hypothetical economy is $250 and the price level (P) initially is 100. Use the short-run aggregate supply schedules below to answer the questions that follow. AS (P - 100) AS (P - 125) AS (P - 75) P Q P P 125 $ 280 125 $ 250 125 $ 310 100 250 100 220 100 280 75 220 75 190 75 250 Instructions: Enter your answers as a whole number. a. What is the level of real output in the short run if the price level unexpectedly rises from 100 to 125 because of an increase in aggregate demand? What happens if the price level unexpectedly falls from 100 to 75 because of a decrease in aggregate demand? b. What is the level of real output in the long run when the price level rises from 100 to 125? When the price level falls from 100 to 75?