Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 32, Problem 7DQ
Subpart (a):
To determine
Economic conditions and the shifts in AD and AS curves.
Subpart (b):
To determine
Economic conditions and the shifts in AD and AS curves.
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e Page 426
13.1. What is the aggregate demand-aggregate
supply model?
Fill in the blanks to complete the following passage
concerning the history of U.S. recessions.
Since the year 1900, the United States has experienced
recessions. Since 1970,
recessions have
occurred.
2
7
22
42 +
LO
5
10
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
Refer to the diagram that shows an AD/AS model for a hypothetical economy. The economy begins in long-run equilibrium at point A.
AS2
Following the negative AS shock shown in the diagram, the adjustment process will take the economy to a long-run equilibrium where the price level is
and real GDP is
AS,
O A. 110: 1,120
O B. 50: 1.020
O C. 50; 950
O D. 110; 750
O E. 70; 1,020
70-
50-
*......
AD
750
1020
1120
950
Real GDP
Price Level
Chapter 32 Solutions
Economics (Irwin Economics)
Ch. 32.7 - Prob. 1QQCh. 32.7 - Prob. 2QQCh. 32.7 - Prob. 3QQCh. 32.7 - Prob. 4QQCh. 32.A - Prob. 1ADQCh. 32.A - Prob. 2ADQCh. 32.A - Prob. 1ARQCh. 32.A - Prob. 2ARQCh. 32.A - Prob. 1APCh. 32.A - Prob. 2AP
Ch. 32 - Prob. 1DQCh. 32 - Prob. 2DQCh. 32 - Prob. 3DQCh. 32 - Prob. 4DQCh. 32 - Prob. 5DQCh. 32 - Prob. 6DQCh. 32 - Prob. 7DQCh. 32 - Prob. 8DQCh. 32 - Prob. 9DQCh. 32 - Prob. 1RQCh. 32 - Prob. 2RQCh. 32 - Prob. 3RQCh. 32 - Prob. 4RQCh. 32 - Prob. 5RQCh. 32 - Prob. 6RQCh. 32 - Prob. 7RQCh. 32 - Prob. 8RQCh. 32 - Prob. 9RQCh. 32 - Prob. 1PCh. 32 - Prob. 2PCh. 32 - Prob. 3PCh. 32 - Prob. 4PCh. 32 - Prob. 5P
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Similar questions
- Price level 170 140 F 120 100 0 L AS AD3 AD, AD₂ 3.0 4.0 5.0 6.0 7.0 8.0 Real GDP In Exhibit 10-8, if aggregate demand shifts from AD₁ to AD2. a. real GDP will increase from $3.0 to $7.0, and the price level will remain the same. AD5 ADA Ob. real GDP and the price level will both remain the same. Oc. real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. O d. real GDP will increase from $3.0 to $4.0, and the price level will remain the same.arrow_forwardWith the passage of time, which of the following will help direct this economy in Figure 10-21 toward its potential long-run rate of output (e1 to E2)? Figure 10-21 Price Level ti LRAS E₂ SRAS, SRAS: AD₂ AD₁ Y, Y₁ Goods and Services (Real GDP) Output is initially less than long-run capacity O lower interest rates that will stimulate AD and lower resource prices that will increase SRAS O higher interest rates that will reduce aggregate demand and higher resource prices that will reduce SRAS lower interest rates and higher resource prices, both of which will stimulate aggregate demand O higher interest rates that will reduce SRAS and lower resource prices that will stimulate aggregate demandarrow_forward(3)Suppose the model for an economy is given by Y = C +1 + G + NX C = a + bYd Yd = (Y-t Y) I = lo G = Go NX = g-mY where lo = 900, Go = 1,200 and the constants take the following values: a = 220. b = 0.9 t = 0.3, g = 500, m = 0.1 (a)For this economy, find the value of equilibrium real output, tax revenue, disposable income (Yd) personal consumption expenditure and net export. (b)Suppose that investment increases by 100, determine the change in real output associated with this Increase in investment spending.arrow_forward
- Consider the basic AD/AS macro model. A rise in an input price like the price of oil would be expected to cause a new macroeconomic equilibrium in which the price level Select one: O a. is lower and real GDP higher than in the initial equilibrium. O b. and real GDP are higher than in the initial equilibrium. O c. is higher and real GDP remained the same as in the initial equilibrium. O d. is higher and real GDP lower than in the initial equilibrium. O e. and real GDP are lower than in the initial equilibrium.arrow_forwardSuppose the economy is in a long-run equilibrium. There is a simultaneous increase in the money supply, a tax cut, an increase in the level of investment confidence about future business conditions, and a depreciation of the Canadian dollar. In the short run, what would you expect to happen given a positively sloped SRAS curve? Select one: O a. The price level and real GDP will both increase. cross out O b. The price level and real GDP will both cross out decrease. O c. The price level and real GDP will both stay the cross out same. O d. The price level will increase, and the real GDP cross out will decrease. O e. The effect on the price level and real GDP is cross out indeterminate.arrow_forwardFigure 13-4 Price level 112 110 8% O 12% 10% LRAS O 9.1% LAAS SRAS, 11.0 118 12.1 AD, SRAS Refer to Figure 13-4. In the figure above, LRAS₁ and SRAS1 denote LRAS and SRAS in year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in year 1, what is the growth rate in potential GDP in year 2? AD₂ Real GDP (trillions of dollars)arrow_forward
- Price level LRAS AS1 Figure 12.8 C B A ASO AS₂ AD₁ ADO E Y2 Yo Y₁ Aggregate output ($ billion) AD₂ Refer to Figure 12.8. This economy cannot continue to produce Y₁ (or at point B) because O the price of raw material will increase, shifting the aggregate demand curve to AD2. O all of the above O the price of raw material and wages will increase shifting the aggregate supply curve to AS₁. O the price of inputs will decrease, shifting the aggregate supply curve to AS2.arrow_forwardYou are hired by the Council of Economic Advisors (CEA) as an economic consultant.The chairperson of the CEA tells you that she believes the current unemployment rate istoo high. The unemployment rate can be reduced if aggregate output increases. She wantsto know what policy to pursue to increase aggregate output by 300 billion TL. The bestestimate she has for the MPC is 0.8. Which of the following policies should yourecommend?a) Increase government purchases by 75 billion TL.b) Reduce taxes by 75 billion TL.c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL.d) Reduce the budget deficit by 300 billion TLarrow_forwardQUESTION 41 A C LRAS LRAS _LRAS 大大大 40 50 20 30 40 50 20 30 real GDP = Q 20 30 real GDP = Q real GDP = Q 60 50 40 30 20 10 P level 0 10 -AS- AD + 40 50 60 50 40 30 20 10 P level 0- 41. Which of the figures above illustrates an economy in long-run equilibrium? O a) Figure A b) Figure B c) Figure C o 10 B AS AD 60 50 40 30 20 10 P level 0 10 -AS ADarrow_forward
- Which one of the following statements is correct? O A. Cheaper availability of credit ? rightward shift of the AD curve ? decrease in general price level. O B. Increased export earnings ? rightward shift of the AS curve ? increase in the general price level. O C. Drought ? leftward shift of the AS curve ? decrease in the general price level. O D. Decreased productivity? leftward shift of the AS curve ? increase in the general price level.arrow_forwardRefer to the information provided in Figure 12.4 below to answer the question(s) that follow. AS AD Yo Output Figure 12.4 Refer to Figure 12.4. If the economy is currently at the intersection of AS and AD, a decrease in AD with no change in AS will cause Select one or more: 口a. lower output. b. higher price levels. O C. lower price levels. O d. higher output. Price levelarrow_forwardThe figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model. Figure 8.3 U.S. Price Level 100 m 9 AS₁ to AS3 AS₁ to AS₂ AD₂ toAD3 O AD₂ to AD₁ O AD₁ to AD₂ AS AS₁ 200 300 400 500 Real GDP (billions of dollars) AD AS₂ In Figure 8.3, which of the following shifts would result in stagflation (economic stagnation and inflation)?arrow_forward
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