An expected rise in the inflation rate for consumer goods, like refrigerators will O decrease aggregate demand O decrease in short run aggregate supply O increase in short run aggregate supply O increase aggregate demand
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- The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table 24.3 shows. Plot the AD/AS diagram. Identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect concern about inflation in this economy to be relatively high or low? Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. How will the shift in AD affect the original output, price level, and employment?What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant. a. The expectation of rapid inflation b. A 10 percent reduction in personal income tax rates c. A sizable increase in labor productivity (with no change in nominal wages) d. A 12 percent increase in nominal wages (with no change in productivity) e. Depreciation in the international value of the dollar.In the short run, what is the impact on the price level and real GDP of each ofthe following:a. An increase in consumption brought about by a decrease in interest rates.b. A decrease in exports brought about by an appreciation of the dollar.c. A rise in wage rates.d. A beneficial supply shock.e. An adverse supply shock.
- What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant.a. A widespread fear of depression on the part of consumers.b. A $2 increase in the excise tax on a pack of cigarettes.c. A reduction in interest rates at each price level.d. A major increase in Federal spending for health care.e. The expectation of rapid inflation.f. The complete disintegration of OPEC, causing oil prices to fall by one-half.g. A 10 percent reduction in personal income tax rates.h. A sizable increase in labor productivity (with no change in nominal wages).i. A 12 percent increase in nominal wages (with no change in productivity).j. Depreciation in the international value of the dollar.Which of the following increases Aggregate Demand? a. Decrease in Money Supply b. Increase in Interest Rates c. Increase in the Money Supply d. Stronger US DollarDemand-pull inflation arises due to Part 2 A. a higher price level. B. a decrease in the short-run aggregate supply. C. a depreciation of the US$. D. a decrease in the aggregate demand. Part 3 Which of the following would create demand-pull inflation? Part 4 A. An increase in household income. B. A decrease in wages paid to workers. C. Increased international trade barriers. D. An increase in the real rate of interest.