Question
In: Economics
Draw an aggregate demand/aggregate supply model of the economy to predict what happens to GDP, price,...
Draw an aggregate demand/aggregate supply model of the economy to predict what happens to GDP, price, and unemployment levels when households increase credit card debt or usage. Label graph.
Solutions
Expert Solution
When a household in the market increases the usage of credit card, this will shift the AD curve to the right and the new equilibrium will be at a higher price and higher level of output.
Here, the intial equilibrium in
the market was at A, price level p2 and ouptut q1, when the use of
credit card increased the demand curve shifted to the right and the
new equilibrium will be at a higher price P1 and higher output Q*,
and equilibrium B.
Rahul Sunny answered 2 years agoRelated Solutions
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Use the Aggregate Demand-Aggregate Supply Model to illustrate
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Using the aggregate demand-aggregate supply model, predict what happens in the short run when the federal government enacts a cut in the personal income tax rates.
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ESSAY 1. Draw the Phillips curve. Use the model of aggregate demand and aggregate supply to...
ESSAY
1. Draw the Phillips curve. Use the model of
aggregate demand and aggregate supply to show how policy can move
the economy from a point on this curve with high inflation to a
point with low inflation.
2. Does inflation and unemployment would be related in the long
run? Give your explanation and draw the graph.
3. Suppose there is a tornado in western Oklahoma, causing a
supply shock for wheat. What will happen in aggregate demand and
aggergate...
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graph and aggregate supply in the immediate short run. In the
second graph, again show aggregate demand, but this time show
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Discuss the following by referring to...
(Explain what happens to the position of the nation's aggregate demand or aggregate supply curve, the...
(Explain what happens to the position of the nation's
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(a) Consumer confidence
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(b) Stock prices decline 40
percent.
(c) Oil prices drop to $12 per
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(Hint: Example: AS shifts to the right, RGDP declines, P
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Using the aggregate demand and aggregate supply model, explain
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Using the aggregate demand and aggregate supply model, explain the effects of the following on price...
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[10 marks]
(b) Firms have begun to use more high-tech machineries for
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