A central bank forecasts a rise in raw material costs. The government plans to increase spendingon health and education.The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply,AS, diagram.What would be the new equilibrium point in the short run if the forecasts prove to be accurate andthe government plans are implemented?AS,AS2generalpricelevelASBAAD, AD AD,real outputC.

AS curve shifts when the factors affecting aggregate supply changes. It will shift to right when the…

Answered: the new equilibrium point in the short…

Business

Economics

the new equilibrium point in the short run

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 12P

See similar textbooks

Related questions

Q: In the long run

A: In the long run firms get more power to change inputs.

Q: Sketch a supply curve that represents the supply of salt in the short run. Explain your diagram? Add…

A: According to law of supply, the quantity supplied and the price is positively related keeping other…

Q: rease in the short run ease in the short run

A: Cash balance refers to the part of income that people want to hold as cash in hand.

Q: Explain how markets conditions in the short run.

A: The amount of time a company has been in business determines its output. The firm's production…

Q: PRICE (Dollars per quart) Short-run Subply Demand Short-run Supply Short-run Equilbrium Demand…

A: The curve that depicts various quantities of goods and services being demanded at various price…

Q: Factors that cause the short-run supply curve to change are factors that affect

A: In the short run supply can be able to change with limited resources.

Q: The long-run supply curve indifferent cost industries The following graph shows the market for milk.…

A: Answer -

Q: Explain "Greater production is not tantamount to greater profit"

A: Economics is the branch of social science that deals with the production, distribution, and…

Q: Explain the concept of supply curve? Show the relationship between the Short run supply curve and…

A: The supply curve is a graph that shows the relationship between the cost of a commodity or service…

Q: Austin owns the Fruit Bowl Inc company. Which of the following would be short run decisions for…

A: There are many types of inputs used in the production of goods and services. Two of them are capital…

Q: What are the similarities and differences between a short-run supply curve and a short-run market…

A: Supply is the quantity seller are willing to sell at certain time and place . And supply curve…

Q: Why is it important for managers to understand the mechanics of supply and demand both in the short…

A: The terms "long run" and "short run" do not relate to a specific time period like three months or…

Q: In the short run, each firm experiences a loss of $

A: We know , Profit = TR - TC TR = Price * Quantity TR = 100 *50 TR = 5000 ATC = TCQ TC = ATC * Q TC…

Q: What is the short run

A: In Economics there are shortrun, long run and very long run concepts short run in economics…

Q: If new technology in a perfectly competitive market brings about a substantial reduction in costs of…

A: The term "perfect competition" refers to a fictional market structure in which all suppliers are…

Q: A profit-maximizing business incurs an economic loss of $$30,000 per year. Its fixed cost is $45,000…

A: Short run business decision: It is given that, it is a profit-optimizing firm that incurs an…

Q: In the short run, a competitive firms supply curve is

A: A perfectly competitive firm is price taker in nature, and hence faced a horizontal demand curve.

Q: (b) In the long run, is the lowest price per chair higher or lower than that of the short run?…

A: In the short run, some factors of production are fixed and some factors of production are variable…

Q: You are operating in a perfect market are you are price taker? Why?

A: The perfect competitive market is a type of market, which is characterized by a large number of…

Q: Explain why profit is greatest at this rate of output If fixed costs were $10 higher than those…

A: Producers objective is to maximize his or her profit . And The profit gets Maximized at the level of…

Q: What is the shut-down condition? a..A condition stating when a firm should cease to operate and…

A: A firm shuts down and stops producing in the short run, if it can't cover its revenue using its…

Q: Productive efficiency means output (production) is produced in the long run at

A: A perfectly competitive market is the type of market structure in which several buyers and sellers…

Q: Which of the following are short-run and which are longrun adjustments? Wendy’s builds a new…

A: In economics, there are two periods that are studied to understand the investment decisions of the…

Q: When will a business shut-down in the short-run?

A: Short-run: - it is a short time period in which some factors of production are variable and some are…

Q: An example of a perfectly competitive industry is

A: Perfectly Competitive Market is defined as a market structure with the following characteristics:…

Q: A strawberry farm operating in a perfectly competitive market is operating below the break-even…

A: Definition: A shutdown point is a level of tasks at which an organization encounters no advantage…

Q: (Figure: Interpreting Short-Run Supply Curves) Based on the graph, which of the curves would MOST…

Q: Fill in the blank: In the long run, maximizing profits is different from minimizing costs as the…

A: In a market, there are some differences in dealing the market condition in the short-run and in the…

Q: Explain market conditions in the long run

A: In the long run, perfectly competitive marketplaces look different than they do in the short run.…

Q: Which situation represents the long run?

A: In situation (i) both the input are variable and in situation (ii) input 1 is variable and input 2…

Q: What is most likely to increase the total output of a firm in the short run? A a rise in the length…

A: Hi! Thank you for the question. As per the honor code, We’ll answer the first question since the…

Q: Briefly define the short run and long run supply curve?

A: The supply curve is a graphical representation that describes the relationship between the price and…

Q: How is long run equilibrium achieved

A: The firms produce goods and services using different inputs and result in the maximisation of the…

Q: Which stage of short run production is efficient? Why?

A: In microeconomics, we have two time periods namely short run and long run. Short run is the time…

Q: Distinguish between short-run and long-run supply curves.

A: Short run refers to a period of time during which some manufacturing elements are constant while…

Q: calculate the profit at the production level.

A: Profit is the difference between Total Revenue and Total Cost. The assumption is the total cost…

Q: Draw the two graphs and explain the market conditions at $50, $60 in the short run & the return to…

A: * ANSWER :-

Q: On the graph the supply in the Rest of the World has shifted from Sstart to S2 and the market in the…

A: For answering this question, we will analyse each of the given options separately.

Q: Describe what will happen and why to the firm’s costs and profits as the firm makes its choices.…

A: In a perfect competition market a firm has only one major decision to make which is the amount of…

Q: The short-run supply curve for a firm is

A: Option d is right answer The portion of MC above AVC Portion that,marginal ,cost curve be Situated…

Q: Which of the following is an element of the (supply chain )? a sourcing b manufacturing C…

A: A supply chain begins with the determination of crude materials to deliver labor and products and…

Q: What is long run and short run production? What is immediate market period

A: Meaning of Production: The term production refers to the situation under which the manufacturer…

Q: Explain the difference between the short and the long run in production

A: The function that depicts the existence of technological relation between quantities of the good…

Q: Choose the statement that is true. Fixed costs in the long run can become variable in the short run.…

A: Out of the given statements, only the fourth statement is true. The reason for this is explained…

Question

A central bank forecasts a rise in raw material costs. The government plans to increase spending
on health and education.
The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply,
AS, diagram.
What would be the new equilibrium point in the short run if the forecasts prove to be accurate and
the government plans are implemented?
AS,
AS2
general
price
level
AS
B
A
AD, AD AD,
real output
C.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1 SHIFT IN AS AND AD CURVES

VIEW

Step 2 ANSWER

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Review the problem in the Work It Out titled"Interpreting the AD/AS Model." Like the informationprovided in that feature, Table 24.2 shows informationon aggregate supply, aggregate demand, and the pricelevel for the imaginary country of Xurbia. a. Plot the AD/AS diagram from the data. Identifythe equilibrium.b. Imagine that, as a result of a government taxcut, aggregate demand becomes higher by 50 atevery price level. Identify the new equilibrium.c. How will the new equilibrium alter output? Howwill it alter the price level? What do you thinkwill happen to employment?
Please draw a AD-AS model as to how whether a tax that improves people’s health could have any potential long-term benefits for the economy.
Exercise D25 What role does government play in stabilizing the economy and what are the tradeoffs that must be considered?
What is the role of daynamic in macroeconomic? What are the diffrence between static and daynamic?
The following graph represents an economy. Initially, they produced an aggregate output of $6,000 until they decreased consumption by $500. If price levels did not change, output would have fallen to $5,100. However, prices decreased because of the decrease in consumption, so output only fell to $5,400. Aggregat e Price SRAS 100 97 ADo AD Aggregat 5,10 5.40 6,00 e Outout a. Calculate the simple Keynesian multiplier if the price levels had not changed. Round the answer to the nearest two decimal points. b. Calculate the actual spending multiplier after the prices decreased. Round the answer to the nearest two decimal points.
What is macro_economics
In 2013, Prussia's aggregate demand curve was determined by the equation M + 1-4% A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph Which of the factors could have resulted in the change irn aggregate demand seen between 2013 and 2014? 13 AD 2013 an improvement in technology O an increase in imports O higher consumer confidence O a decrease in oil prices 12 AD 2014 10 8 5 4 3 2 4 -3 2 1 0 1 2 3 4 5 6 78 9 10 Real GDP growth rate
37.6% R Give Up? O Hint ment Score: Resources Chec on 5 of 15 <. In 2013, Prussia's aggregate demand curve was determined by the equation M +0= 4%. A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation M +6= 7%. Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph. Which of the factors could have resulted in the change in 14 aggregate demand seen between 2013 and 2014? 13 O an improvement in technology 12 11 an increase in imports 10 a decrease in oil prices 8. AD 2013 O higher consumer confidence 7. 5. -3 -2 -1 3. 6. 10 Real GDP growth rate F12 AD 2014 4. 6, 4. Inflation rate
What is the macroeconomic equilibrium? The macroeconomic equilibrium is real GDP of $ ___ trillion and a price level is ___. SS attached thanks
Explain whether each of the following events shiftsthe short-run aggregate-supply curve, the aggregatedemand curve, both, or neither. For each event thatdoes shift a curve, draw a diagram to illustrate theeffect on the economy.a. Households decide to save a larger share of theirincome.b. Florida orange groves suffer a prolonged period ofbelow-freezing temperatures.c. Increased job opportunities overseas cause manypeople to leave the country.
Theshortrunaggregatesupplycurvewasconstructedassumingthatasthepriceofoutputsincreases,thepriceof inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
Illustrate and interpretthe short-run andlong-run aggregatesupply curves