Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. The policy will cause the natural rate of unemployment to, which will: Not affect the long-run aggregate supply curve Shift the long-run aggregate supply curve to the left Shift the long-run aggregate supply curve to the right In the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve. Direction of LRAS Curve Shift Left Right No Shift Event Many workers leave to pursue more lucrative careers in foreign economies. A scientific breakthrough significantly increases food production per hectare of farmland. A natural disaster destroys a significant fraction of the economy's production facilities.

Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. The policy will cause the natural rate of unemployment to, which will: Not affect the long-run aggregate supply curve Shift the long-run aggregate supply curve to the left Shift the long-run aggregate supply curve to the right In the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve. Direction of LRAS Curve Shift Left Right No Shift Event Many workers leave to pursue more lucrative careers in foreign economies. A scientific breakthrough significantly increases food production per hectare of farmland. A natural disaster destroys a significant fraction of the economy's production facilities.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Aggregate Demand And Supply

Section14.A: The Self Correcting Aggregate Demand And Supply Model

Problem 1SQP

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Table 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect prices to be a relatively large or small concern for this economy? Imagine that input prices fall and so AS shifts to the right by 150 units. Identify the new equilibrium. How will the shift in AS affect the original output, price level, and employment?
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?
In 2013, Prussia's aggregate demand curve was determined by the equation M + 1-4% A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph Which of the factors could have resulted in the change irn aggregate demand seen between 2013 and 2014? 13 AD 2013 an improvement in technology O an increase in imports O higher consumer confidence O a decrease in oil prices 12 AD 2014 10 8 5 4 3 2 4 -3 2 1 0 1 2 3 4 5 6 78 9 10 Real GDP growth rate
R The model of aggregate demand/aggregate supply... O Identifies the equilibrium GDP and price level as well as the gap between the equilibrium GDP and the potential GDP Identifies the potential GDP and price level as well as the gap between the price level and the inflation. O Identifies the equilibrium GDP the economy will reach in the long A run O Identifies the equilibrium quantity and price for consumer goods 10 % 5 T 6 O Y Com liji fa 887 & 7 7 U 8 4 f10 num lk. 8 ( 5 9 開

Real GDP Real GDPDemanded, Price Level Supplied,Billions (Price Index) Billions$100 300 $450200 250 400300 200 300400 150 200500 100 100 Use these sets of data to graph the aggregate demandand aggregate supply curves. What is the equilibriumprice level and the equilibrium level of real output inthis hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output?Explain.b. Why will a price level of 150 not be an equilibriumprice level in this economy? Why not 250?c. Suppose that buyers desire to purchase $200 billion ofextra real output at each price level. Sketch in the newaggregate demand curve as AD1. What factors mightcause this change in aggregate demand? What is thenew equilibrium price level and level of real output?
Identify three factors that can shift the aggregatedemand curve to the right and three different factorsthat can shift the aggregate demand curve to the left
Price Level 0 AS₁ a ASO b c Real GDP Refer to the figure above. If aggregate supply is AS, and aggregate demand is ADo, then: a surplus of real output of gh yould f represents a price level that would result in a surplus of real output of ac f represents a price level that would result in a shortage of real output of ac f represents a price level that would result in a surplus of real output of a at any price level above g. a shortage of real output would occur occur
160 150 140 130 120 110 100 PRICE LEVEL Aggregate Demand 0 100 200 300 400 500 000 700 800 REAL GDP (Billions of dollars) Which of the following are reasons the aggregate demand curve is downward sloping? Chelk all that apply. A higher price level decreases consumption through the substitution effect. A lower price level makes domestically produced goods less expensive than foreign goods. A higher price level decreases the real value of consumers' assets. As the aggregate price level rises, the cost of borrowing money will This phenomenon is known as the 8 90 Aggregate Demandi 80 causing the quantity of output demanded to: effect.
The economy has shifted and the quantity of the real GDP supplied has increased. What has potentially happened to aggregate price levels? Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. O Potentially the price levels have decreased to a lower aggregate price level and if the wages are sticky, businesses have hired more employees as labor has become cheaper. Potentially the price levels have increased to a higher aggregate price level and if the wages are sticky, businesses have fired some employees as labor has become too expensive.
How does an increase in the price level affect the quantity of real GDP supplied in the long run? OA In the long run, an increase in the price level will increase real GDP OB In the long run, an increase in the price level decreases inflation, which will decrease real GDP OC. In the long run, an increase in the price level increases inflation, which will decrease real GDP OD. Changes in the price level do not affect the level of GDP in the long run. CIDS Price level (GDP deflator) 123 113- 103- Long-Run Aggregate Supply LRAS2 LRAS2 LRAS23 Real GDP (trillions of $)
Suppose the economy of Hawkland is initially at full employment. Currently real GDP is $20 trillion, theprice level is 120, the money wage is $36/hour, the full employment quantity of labor is 300 billionhours per year, and the current unemployment rate is 6%. Draw a fully labeled graph depicting the aggregate goods and services market in Hawkland.Be sure to label all axes and include numerical values for variables on the axes where relevant. Providea brief explanation to the side and show any necessary calculations. Label any relevant curves with azero (0, for example: AD0) and use a zero in a circle to clearly label the initial equilibrium
Identify which curve on the previous graph corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose Not Shown. In the descriptions, AD represents aggregate demand; SRAS represents short-run aggregate supply; LRAS represents long-run aggregate supply. Description SRAS if the expected price level is 50 SRAS if the expected price level is 70 SRAS if the expected price level is 60 LRAS AD a O O O b O O O O O с O O O O O d O с O O Not Shown O O O O Suppose the economy is currently in short-run equilibrium at point L. In this case, the economy is producing at an output level potential output. At current prices and wage levels, real wages are what firms and workers expected when they agreed on wage curve to shift to the contracts. In the long run, if the price level and the nominal wage are both flexible, wages will, which will cause the . Assuming the other two curves do not change, the economy will reach a new equilibrium at an output of…