Question
In: Economics
Define for each scenario whether AD (Aggregate Demand) or AS (Aggregate Supply) will shift, and indicate...
Define for each scenario whether AD (Aggregate Demand) or AS (Aggregate Supply) will shift, and indicate if it will be an outward shift (rightward) or inward shift (leftward).
a. A fall in the price of oil
b. A rise in consumer optimism
c. A hurricane destroys factories in South Carolina
d. Foreigners watch fewer U.S.-made movies
e. New inventions occur at a faster pace
f. A faster money growth
Solutions
Expert Solution
a. A fall in the price of oil reduces cost of production. This raises production and causes a rightward shift of the aggregate supply curve.
b. A rise in consumer optimism raises consumption which is a significant part of aggregate demand. This causes a rightward shift of the aggregate demand curve.
c. A hurricane destroys factories in South Carolina. This will increase the cost of production. This reduces production and causes a leftward shift of the aggregate supply curve.
d. Foreigners watch fewer U.S.-made movies. This implies lower export services and so lower net exports. This causes a leftward shift of the aggregate demand curve.
e. New inventions occur at a faster pace. This increases productivity and raises production of goods and services. This causes a rightward shift of the aggregate supply curve.
f. A faster money growth increases money supply and reduces rate of interest. This raises investment which is a significant part of aggregate demand. This causes a rightward shift of the aggregate demand curve.
Rahul Sunny answered 7 months agoRelated Solutions
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Define for each scenario whether AD (Aggregate Demand) or AS
(Aggregate Supply) will shift, and indicate if it will be an
outward shift (rightward) or inward shift (leftward).
A fall in the price of oil
A rise in consumer optimism
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New inventions occur at a faster pace
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THE AMERICAN JOBS ACT
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Discuss the importance AS-AD model in explaining the
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Consider the Aggregate Demand (AD)-Aggregate Supply (AS) model studied in class. The AD function is composed...
Consider the Aggregate Demand (AD)-Aggregate Supply (AS) model
studied in class. The AD function is composed of the following
elements:
? = ? + ??? ∙ (? − ?); ? = ? − ?; ? = ?; ?? = ?∗ − ?; ? = ? + ? ∙
?
The AS is given by the function:
? = 4,
(a) Assume that the economy is in its very short-run equilibrium
with the following values: ? = ? = 0; ?...
Aggregate Demand and Aggregate Supply Assume Broncoland has the following aggregate demand (AD) and short-run aggregate...
Aggregate Demand and Aggregate Supply Assume Broncoland has the
following aggregate demand (AD) and short-run aggregate supply
(SRAS) schedules.
Price Level
Aggregate Demand
Short-Run Aggregate Supply
120
8250
9700
115
8300
9750
110
8400
9700
105
8500
9600
100
8600
9500
95
8700
9300
90
8800
8800
85
8900
8000
80
9100
7000
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The amount of taxes collected decreases. (Increases or
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#4
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Assume the economy is initially in a recession.
2. Using the quantity equation (the equation of exchange)
briefly explain the quantity theory of money. Specifically, how the
quantity theory of money explains why inflation occurs.
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