Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 2P
To determine
Real output in the short run and the long run.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
ADVANCED ANALYSIS Suppose that the equation for a particular short-run AS curve is P= 40 + 0.5Q, where Pis the price level and Q
is real output in dollar terms.
Instructions: Enter your answers as a whole number.
a. What is Q if the price level is 130?
b. Suppose that the Qin your answer is the full-employment level of output. By how much will Q increase in the short run if the price
level unexpectedly rises from 130 to 142?
By how much will Q increase in the long run due to the price-level increase?
6. Why the aggregate supply curve slopes upward in the short run
In the short run, the quantity of output supplied by firms can deviate from the natural level of output if the actual price level deviates from the
expected price level in the economy. A number of theories explain reasons why this might happen.
For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose
firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their
goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 110. Faced with high menu costs,
the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will
and firms that rely on catalogs will
respond by
the quantity of output they supply. If enough firms face high costs of adjusting prices, the…
Price Level
LAS
SAS,
SAS,
AD
SAS,
AD,
AD,
Real Output
Refer to the graph. Suppose the economy is at SAS, and AD₂. What is a possible way the
economy can return to potential output? What dynamic price level feedback effect could
prevent the return to potential output? How would the dynamic price level feedback effect show
up in the graph?
O A decrease in asset prices in the economy; a decrease in asset prices would
further decrease AD; a shift in AD from AD2 to AD3
O A decrease in material costs in the economy; a decrease in material costs would
decrease AD; a shift in AD from AD2 to AD1
A decrease in wages in the economy; a decrease in wages would further decrease
AD; a shift in AD from AD2 to AD3
A decrease in wages in the economy; a decrease in wages would further decrease
AD; a shift in AD from AD2 to AD1
Knowledge Booster
Similar questions
- /Consider a baseline long run equilibrium where output is 22 trillion dollars, and the price level is 100. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium.Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant) this is a Continuing from Question 3, and Question 3 had been answered in Answer 3 table. You should answer in table Anwser4 with following stepsarrow_forwardWhich of the following would the employment level rise to in the short run? Select one: O O a. An increase in government spending. b. The minimum wage increases. c. A negative supply shock.[KA1] [KA1] edited this question as it seemed unclear to me. Would you please address this question and answers? Aarrow_forward16 Suppose that Glitter Gulch, a gold mining firm, increased its sales revenues from newly mined gold from $10 million to $20 million between one year and the next. Assuming that the price of gold increased by 100 percent over the same period, by what numerical amount did Glitter Gulch's real output change? If the price of gold had not changed, what would have been the change in Glitter Gulch's real output? 2$ millionarrow_forward
- Exhibit 14A-2 Macro AD-AS Model Price Level CPI 130 120 110 100 90 O J T 1 1 1 17 1 1. 1 IN F I 1 1 9.0 1 N 1 LRAS 1 SRAS AD LL 9.5 10.0 10.5 11.0 11.5 Real GDP (trillions of dollars per year) In Exhibit 14A-2, the intersection of AD with SRAS indicates: O a short-run equilibrium. O a long-run equilibrium. O that the economy needs policies to reduce unemployment. O that the economy is at full employment.arrow_forwardSuppose that the table presented below shows an economy's relationship between real output and the inputs needed to produce that output: Input Quantity Real GDP 150.0 $ 400 112.5 300 75.0 200 Instructions: Enter your responses answers rounded to 2 decimal places. a. What is the level of productivity in this economy? b. What is the per-unit cost of production if the price of each input unit is $2? $ C. Assume that the input price increases from $2 to $3 with no accompanying change in productivity. What is the new per-unit cost of production? In what direction would the $1 increase in input price push the economy's aggregate supply curve? (Click to select) v What effect would this shift of aggregate supply have on the price level and the level of real output? O The price level would decrease and real output would increase. O Both the price level and real output would remain the same. O The price level would decrease and real output would remain the same. O The price level would increase…arrow_forwardpre to co Price Level 0 I I 2 I I 4 1 6 8 10 12 14 Real GDP (Trillions Dollars) SRAS AD 16 18 20 AD SRAS Which of the following best describes the effect of an increase in wage rates? O The price level remains the same, but the Real GDP decreases to $6 trillion. O The price level falls below PE, and the Real GDP increases to $6 trillion. The price level rises above PE, and the Real GDP decreases to $6 trillion. O The price level rises above PE, but the Real GDP remains the same.arrow_forward
- Instructions: Enter your answers as whole numbers. A) What are the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output? B)If the price level in this economy is 150, will quantity demanded equal, exceed, or fall short of quantity supplied? By what amount? If the price level is 250, will quantity demanded equal, exceed, or fall short of quantity supplied? By what amount? C) Suppose that buyers desire to purchase $ 200 billion of extra real output at each price level. What are the new equilibrium price level and level of real output?arrow_forward6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output supplied by firms can deviate from the natural level of output if the actual price level deviates from the expected price level in the economy. A number of theories explain reasons why this might happen. For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 90. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will ▼, and firms that rely on catalogs will respond by ▼ the quantity of output they supply. If enough firms face high costs of adjusting prices, the…arrow_forward6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output supplied by firms can deviate from the natural level of output if the actual price level deviates from the expected price level in the economy. A number of theories explain reasons why this might happen. For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 90. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will ▼, and firms that rely on catalogs will respond by the quantity of output they supply. If enough firms face high costs of adjusting prices, the…arrow_forward
- 12. Assume that an economy operates according to the sticky-wage model. The nominal wage was set to make labor supply and labor demand equal when the expected price level equaled 120 (as measured by the consumer price index). a. Use a graph of the labor market to illustrate what happens to the quantity of labor employed if the actual price level over the time period when wages are stuck equals 110. b. Use a graph of the production function to illustrate how the quantity of output produced changes if the actual price level equals 110 when the expected price level is 120. c. Given the unexpectedly low price level, will this economy be operating above, below, or at the natural rate?arrow_forwardTable 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect prices to be a relatively large or small concern for this economy? Imagine that input prices fall and so AS shifts to the right by 150 units. Identify the new equilibrium. How will the shift in AS affect the original output, price level, and employment?arrow_forwardFigure 11.2 shows the relationship between the price level and real GDP. Which of the following is the long-run equilibrium point? Figure 11.2 Price level O * O O e 52 V P₁ P₂ P3 0 A point between e* and e" Potential output LRAS e Q3 Q₂ Q₁ SRAS AD AD* AD' Real GDP (trillions of dollars)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781305971509Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning