5. Assume the government follows a Keynesian approach and alters spending to return the economy to full employment. Draw the shift in the AD curve. Assume this policy is effective at returning the economy to a full employment equilibrium. Price ERAS Level 106 104 SRAS 102 100 98 AD 1 3 5 7 9 11 RGDP (Billions) Equilibrium real GDP (short run) MPC 0.8 Equilibrium price level (short run) MPS Spending Multiplier Final equilibrium real GDP (short run) Change in Spending Final equilibrium price level (short run)

5. Assume the government follows a Keynesian approach and alters spending to return the economy to full employment. Draw the shift in the AD curve. Assume this policy is effective at returning the economy to a full employment equilibrium. Price ERAS Level 106 104 SRAS 102 100 98 AD 1 3 5 7 9 11 RGDP (Billions) Equilibrium real GDP (short run) MPC 0.8 Equilibrium price level (short run) MPS Spending Multiplier Final equilibrium real GDP (short run) Change in Spending Final equilibrium price level (short run)

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 6SCQ: Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all...

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Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. (a) An increase in government expenditure in infrastructureClick or tap here to enter text.(b) A severe recession occurs in a country, which has been a major importer of thenation’s exports.Click or tap here to enter text.(c) The federal government increases business taxesClick or tap here to enter text.(d) The Central Bank increases the cash interest rate
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
1. When the federal government engages in COVID-19 fiscal stimulus such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan Act this will affect the AD-AS model by: Group of answer choices a. Decreasing aggregate demand (AD). b. Increasing aggregate demand (AD). c. Decreasing aggregate supply (AS). d. Increasing aggregate supply (AS).
Use the following diagram to answer this question Price level or GDP deflator Ro 41- SRAS₂ ----- AD₂ SRAS, SRAS, -11110 AD₁ AD₁ Output or RGDP Suppose the short-run macroeconomic equilibrium is at point A. In the short run, an open market sale would move the equilibrium to: O A. point E OB. point C O C. point H O D. point B 10
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13. The economy is in short-run macroeconomic equilib- rium at point E in the accompanying diagram. Based on the diagram, answer the following questions. LRAS Aggregate price level SRAS1 E1 P1 AD1 Y1 YP Real GDP a. Is the economy facing an inflationary or a recession- ary gap? b. What policies can the government implement that might bring the economy back to long-run macro- economic equilibrium? Illustrate with a diagram. c. If the government did not intervene to close this gap, would the economy return to long-run macroeco- nomic equilibrium? Explain and illustrate with a diagram.
2. Suppose that a presidential candidate who promised large personal income tax cuts is elected. Use the AD-AS model to predict short-run changes in real GDP and the aggregate price level. Aggregate price level ESR PE SRAS Short-run macroeconomic equilibrium AD YE Real GDP
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PAE Expenditure Line PAE-500+.9Y 6000 5900 5500 5450 5000 500 45 5000 5500 6000 :Refer to the figure above. Based on the Keynesian cross diagram, short-run equilibrium output equals اختر أحد الخيارات 5000 a O 5450 b O 5500 .c O 5900 d O
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