The following graphs show the state of an economy that is currently in Tong-run equilibrium. The first graph shows the aggregate demănd (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phìllips curves (LRPC and SRPC). LRAS AD LRAS AD 12 15 18 OUTPUT (Trillions af dollars) LRPC SRPC LRPC SRPC 10 12 UNEMPLOYMENT RATE (Percent) Which of the following statements are true based on these graphs? Check all that apply. - The current quantity of output is greater than potential output. The natural level of output is $9 trillion. - The unemployment rate is currently 6% higher than the natural rate of unemployment. Suppose the central bank of the economy increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the The long-run effect of the central bank's policy is inflation rate, real GDP. in the unemployment rate, and in INFLATION RATE

The following graphs show the state of an economy that is currently in Tong-run equilibrium. The first graph shows the aggregate demănd (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phìllips curves (LRPC and SRPC). LRAS AD LRAS AD 12 15 18 OUTPUT (Trillions af dollars) LRPC SRPC LRPC SRPC 10 12 UNEMPLOYMENT RATE (Percent) Which of the following statements are true based on these graphs? Check all that apply. - The current quantity of output is greater than potential output. The natural level of output is $9 trillion. - The unemployment rate is currently 6% higher than the natural rate of unemployment. Suppose the central bank of the economy increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the The long-run effect of the central bank's policy is inflation rate, real GDP. in the unemployment rate, and in INFLATION RATE

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 60CTQ: The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table...

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Suppose Chino is a closed economy. A large portion of the work force has joint astrong labor union. As such, the nominal wages of most workers are downwardrigid.Suppose most households lose their wealth in a recent clash of the stock market.How would the price and output level of Chino be affected in the short run?Explain by using the AD-AS model. Particularly, use the sticky-wage model ofaggregate supply to explain the magnitude of the effects on price and output.
QUESTION 10 OB LRAS * Oc O None of the above. SRAS AD In the graph above, an economy moves from point A to B after being hit by a shock, if the Central Bank takes action to keep the unemployment rate at its natural level, where will the economy move to? OA Real GDP
Aggregate price level LRAS SRAS, P, AD Yp Y, Real GDP When the output gap is negative (a recessionary gap), the unemployment rate is below the natural rate. When the output gap is negative (a recessionary gap), the unemployment rate is above the natural rate. When the output gap is positive (a inflationary gap), the unemployment rate is above the natural rate. When the output gap is positive (an inflationary gap), the unemployment rate is below the natural rate.
Consider the Efficiency Wage story. Suppose we had several periods of 0 inflation. Let ST represent the total supply of labor; SNS the supply of non-shirking (not lazy) workers, and SShrk the number of shirking (lazy) workers. Suppose we had several periods of 0% inflation. Then if we had an increase in Aggregate Demand that caused an increase in the Aggregate Price level, we would see which of the following in the short run? Group of answer choices a) higher inflation and lower unemployment. b) None of the other options. c) lower inflation (which would be deflation given our premise) and higher unemployment. d) higher inflation and higher unemployment. e) lower inflation (which would be deflation given our premise) and lower unemployment.
2. Show a AD-AS graph inflation in the short run and the shift in the SAS necessary to eliminate it.
In the aftermath of the Great Recession, the Beveridge cuve in the US...A. ...has shifted to the rightB. ...has shifted to the leftC. ...has been fairly stableD. ...has been unobservable due to lack of data on vacancies
The economy starts out on the curves AD, and SAS- Price level (GDP deflator, 2009 = 100) Suppose that people expect deflation (a falling price level), but aggregate demand remains at AD 240 LAS Show what happens to the short-run and long-run aggregate supply curve. Label the new curve. 200- SASO Draw a point at the new macroeconomic equilibrium. 160 When it becomes obvious to everyone that the deflation is not going to occur, 120 120 O A. long-run aggregate supply increases O B. the money wage rate falls further OC. aggregate demand decreases OD. the money wage rate rises and the short-run aggregate supply curve returns to its original position 80 AD 40- 10 10 11 12 13 14 Real GDP (trillions of 2009 dollars) 15 >>> Draw only the objects specified in the question.
Assume, while an economy is in long-run equilibrium, an adverse supply shock occured, suchas energy prices have incrased. The central bank decides to accommodate this shock and restores theequilibrium quickly. What would be the effect of this policy action on inflation? Explain and illustratewith the help of an AD-AS diagram.
Based on the given figure, the economy is initially in long-run equilibrium at point A. If there is a favorable supply shock that increases potential output and shifts the long- run aggregate supply curve from LRAS to LRAS', then there is initially gap and the short-run aggregate supply curve will Inflation P 24 A B LRAS LRAS D E Y* Output Y' SRAS' SRAS SRAS AD a. an expansionary: eventually shift to SRAS" b. an expansionary; eventually shift to SRAS' c. a recessionary; eventually shift to SRAS' d. a recessionary; eventually shift to SRAS"
1) According to the Phillips Curve, as unemployment falls what happens to inflation? Why? 2) According to the Phillips Curve, as unemployment rises what happents to inflaiton? Why? 3) According to the Aggregate Supply/ Aggrgeate Demand model, if AD increases what happebs to Price Level GDP and Unemployment 4) Accroding to the AS/AD model, if AD decreases what happens to PL, GDP and unemployment? 5) According to the AS/AD model if AS decreases what happens to PL GDP and unemployment? 6) Based on your answer to #5 how would you show the decrease in AS on the Philips Curve?
K How does expected inflation occur? Use the graph to answer this question. Draw the AD curve when it is correctly expected that the inflation rate will be 15 percent a year. Label it. Draw the SAS curve when a change to the money wage rate occurs that correctly anticipates the increase in aggregate demand. Label it. Draw a point at the new equilibrium. As we move up along the LAS curve, the O A. real wage rate is increasing OB. real wage rate is decreasing OC. real wage rate is constant O D. money wage rate is constant 130- 120+ 110- 100- Price level (GDP deflator, 2007 = 100) LAS 90- 100 SAS 1200 AD 800 1000 1050 1100 1150 1200 1250 1300 1350 1400 Real GDP (billions of 2007 dollars) >>> Draw only the objects specified in the question.
For each of the following, use an AD-AS diagram to show the short-run and long-run effects on output and inflation. Assume the economy starts in long-run equilibrium. Instructions: In all the diagrams below, click and drag the appropriate curve or curves to show the short-run changes on the left side and long-run changes (which must also include the short-run changes) on the right side. d. A sharp drop in oil prices (assume the change in oil prices is permanent and no policy actions are taken). Inflation rate Short-Run Effects LRAS Output Y SRAS ADO Inflation rate Long-Run Effects LRAS Output Y SRAS AD