In the long-run, aggregate supply is a horizontal line at the long-run price level people can afford. True False One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption. True False

In the long-run, aggregate supply is a horizontal line at the long-run price level people can afford. True False One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption. True False

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter10: Bringing In The Supply Side: Unemployment And Inflation?

Section: Chapter Questions

Problem 3TY

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Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose potential GDP (LRAS) equals to $2,700 are given by the table. State the short-run equilibrium price level and real GDP. According to the macroeconomic perspectives, is there an inflationary or a recessionary gap? If so, how much is the output gap?
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The 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 B O AD, toAD; O AD, to AD₂ O AD₂ to AD₁ O AS, to AS; AS; to AS₂ 100 200 300 400 AS3 AS₁ AD₂ 500 Real GDP (billions of dollars) AD AS₂ AD3 In Figure 8.3, which of the following shifts would result in stagflation (economic stagnation and inflation)?
The shape of the short-run aggregate supply (SAS) curve reflects two different types of microecanomic markets (auction markets and the posted price markets). How is the price level Vinked to the level of dutput in each market? List five factors that might cause an upward shift of the SAS curve. Maximum number of characters including HTML tags added by text editor): 32,000 w ih Tet fdter fand cheracte Ouen
According to the "4-Quadrant Model" (4QM), which of the following statement is correct? O If there is a positive demand shock in the space market, the housing rent is going to increase in the short run, and will be lower than the current rent in the long run. If there is a positive demand shock in the space market, the housing price is going to decrease in the short run, and increase in the long run. If there is a positive demand shock in the asset market, the housing rent is going to decrease in the long run. O If there is a positive demand shock in the asset market, the housing price is going to decrease in the short run, and will be lower than the current price in the long run.
Assume the aggregate demand for a good follows the law of demand (@gª < 0). Suppose the equilibrium in the market for др the good moves from Point A to Point B. Which statement below must be true? Р A Q A. B. C. Demand decreased and supply decreased Demand increased and supply decreased Demand decreased and supply increased D. Demand increased and supply increased E. Demand increased but we don't know if supply shifted F. Demand decreased but we don't know if supply shifted
On the following graph, use the purple Mine (diamond symbol) plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange ne segments (square symbol) to plat the economy's shart-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120, PRICE LEVEL 116 110 105 100 80 75 0 + 10 20 30 40 90 70 OUTPUT (ons of dollars) 85 120 AS LRAS The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the price
The following graph shows an economy's short-run aggregate supply curve (SRAS), current equilibrium aggregate price level (P₁), and real GDP ( Q₁). The economy currently has Natural Real GDP (QN) of $8 trillion. Use this information to place the orange long-run aggregate supply curve (LRAS, square symbols) in the correct position on the graph. PRICE LEVEL 10 P₁ 8 4 2 0 0 A 기 4 6 8 10 REAL GDP (Trillions of dollars) 2 The equilibrium A₁, shifting SRAS SRAS 12 14 own on the graph, reveals that re GDP (Q₁) is LRAS ? Natural Re GDP. As a result, wages will over time,
The graph below depicts an increase in aggregate demand due to an increase in net exports. This increase in aggregate demand is depicted as a shift from AD to AD₁. Price Level LRAS X AD Real GDP AS AD Tools AS, 0 a. In the long run, aggregate supply will adjust to move the economy back to the full-employment level of output. Show this shift using the graph above. Instructions: Use the tool provided "AS₁" to show the movement back to full-employment output. Plot only the endpoints of the line, keeping AS, parallel to AS with the appropriate Intersection (2 points total). b. How does the new long-run equilibrium compare to the Initial full-employment level before the Increase in net exports? O The price level is higher, but output is lower. O The price level is lower, but output remains the same. O The price level is lower, but output is higher. O The price level is higher, but output remains the same.
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