equilibrium. Price Level (base = 100) 100 The Macroeconomy in long- and short-run equilibrium LRAS SRAS X AD Real GDP (Y) O Suppose the spread of democracy around the world increases consumer confidence in Canada. a. Drag the appropriate line in the correct direction to show the short-run effect on the AS-AD model.

equilibrium. Price Level (base = 100) 100 The Macroeconomy in long- and short-run equilibrium LRAS SRAS X AD Real GDP (Y) O Suppose the spread of democracy around the world increases consumer confidence in Canada. a. Drag the appropriate line in the correct direction to show the short-run effect on the AS-AD model.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1P

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Similar questions

What impact would a decrease in the size of the labor force have on GDP and the puce level according to the AD/AS model?
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
How is recession illustrated in an AD/AS model?
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.
Question 8 In the following AD-AS model, the economy is at point E The Federal Reserve sells bonds and the economy adjusts itself in the long run. The economy moves first to point (please enter a letter). For Blank 2 LRAS B E Po Y SRAS AD1 ADO AD2 A Moving to another question will save this response. Question 8 of 25 >>>> Save Answer (please enter a letter) and then, in the long run, to point Question 8 of 25 >>>
Comparing ModelsWhat are the differences between our Keynesian Cross and the Macro Equilibrium (AS and AD) diagram? Which model has more to offer?
Consider the AD/AS model. In the long run, after factor prices have fully adjusted to any output gaps, real GDP A. and the price level are determined by "long-run aggregate supply." B. and the price level are determined by aggregate demand. C. is determined by potential output and the price level by aggregate demand. D. is determined by aggregate demand and the price level by potential output. E. is determined by AD and the price level is determined by the AS curve.
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?
6.1.What is an AD-AS model and what does such a model as per the givendiagram essentially focus on?6.2.Discuss the diagram in detail by first explaining what leads to step Step 1(representing a shift in curves on the diagram) and indicating what occursto cause shifts in some of the curves. Then discuss Step 2 (whichrepresents other macroeconomic changes) and indicate what happens toother variables when there are shifts in some of the curves as per Step 1. 6.3.What, in general, do the points of intersection between the AS and AS2curves and the AD curve show?6.4.When the LAS curve moves to the right to LRAS2, what exactly do thepoints of intersection between the AS and AS curves and the AD1 curve,indicated as point 1 and point 2, reflect on the diagram?
Take a look again at Figure 1 (originally from the page in the text titled "Neoclassical and Keynesian Perspectives in the AD-AS Model.") Price Level Pn Pi Pk ADK AD Yk ADn Ek Keynesian zone Real GDP Ei LRAS En SRAS Neoclassical zone Intermediate zone Yi Yn Figure 1. Keynes, Neoclassical, and Intermediate Zones in the Aggregate Supply Curve. Near the equilibrium Ek, In the Keynesian zone at the far left of the SRAS curve, small shifts in AD, elther to the right or the left, will affect the output level Yk, but will not much affect the price level. In the Keyneslan zone, AD largely determines the quantity of output. Near the equilibrium En. In the neoclassical zone at the far right of the SRAS curve, small shifts in AD, elther to the right or the left, will have relatively little effect on the output level Yn, but Instead will have a greater effect on the price level. In the neoclassical zone, the near-vertical SRAS curve close to the level of potential GDP largely determines the…
Suppose, initially the Australian economy is atfull employment(in other words the economy is atthe potentialGDP). Using AD-AS model, explain how would each of the following events aectthe economy both in theimmediate and in the long term.a) A slowdown in China’s economic growth due to the sub-prime crisis in the US.b) Union wage settlements push the wage rate up.c) An increase in consumer confidence.
The graph below shows an economy in long-run equilibrium. Suppose that aggregate demand unexpectedly increases so that the short-run equilibrium real GDP increases above $80 billion. a. Using the AD-AS graph below, demonstrate the new price level and long-run equilibrium real GDP that will result assume that the new classical view of a self-correcting economy is accurate. Instructions: Use the tools provided 'AD2' and 'AS2' to plot AD and AS after the increase in aggregate demand and the economy's self-correction. Then use the tool provided 'e2' to indicate the new long-run equilibrium point. Price level 130 120 110 100 90 80 AS2 40 AS LR 80 120 AD₁ AS₁ AD2 160 Real domestic output (billions of dollars) 200 Tools AD2 AS2 Ⓡ