Question

In: Economics

Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run.

Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run.

  1. An increase in government purchases

  2. A major decrease in the stock of capital

  3. A trade surplus

  4. An increase in Labor

Solutions

Expert Solution

a) This will shift the AD curve to the right and the new equilibrium will be at a higher price and higher level of output in the market.

b) This will shift the LRAS and SRAS to the left and the new equilibrium will be at a higher price and lower level of output.

c) A trade surplus will shift the AD curve to the right and the new equilibrium will be at a higher price and higher level of output in the market.

d) An increase in the labor will shift the SRAS to the right and the new equilibrium will be at a lower price and higher level of output.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Use the model of aggregate demand and short-run aggregate supply to explain how each of the...
Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run. a. A decrease in government purchases b. A major improvement in technology c. A trade surplus d. A decrease in Labor
Use the model of aggregate demand and short-run aggregate supply to explain how each of the...
Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run. a. A decrease in government purchases b. A major improvement in technology c. A trade surplus d. An increase in labor cost Question 2: Suggest a monetary policy to adjust the situation in scenario d.
1. Use the model of aggregate demand and aggregate supply (short run) to explain how each...
1. Use the model of aggregate demand and aggregate supply (short run) to explain how each of the following would affect real GDP and the price level in the short run. Include graphs in your answers. a. A decrease in government purchases b. A major improvement in technology c. A reduction in imports d. An increase in price
Question 1: Use the model of aggregate demand and short-run aggregate supply to explain how each...
Question 1: Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run. An increase in government purchases A major decrease in the stock of capital A trade surplus An increase in Labor This is the whole question and I need these answers with the graph, please... Thank you!
The aggregate demand/aggregate supply model is used to understand short-run fluctuations in real GDP (i.e. the...
The aggregate demand/aggregate supply model is used to understand short-run fluctuations in real GDP (i.e. the business cycle). According to the aggregate demand/aggregate supply model, what are some of the things that can cause a recession? Also, discuss the relationship between the business cycle and the unemployment rate?
Explain how each of the following events would affect the short-run aggregate supply curve. a. An...
Explain how each of the following events would affect the short-run aggregate supply curve. a. An increase in productivity b. A decrease in cost of energy c. A decrease in income tax d. Many firms relocate to China looking for lower wage rate e. A decrease in the number of discouraged workers
How does fluctuations in aggregate demand and short-run aggregate supply bring fluctuations in real GDP around...
How does fluctuations in aggregate demand and short-run aggregate supply bring fluctuations in real GDP around potential GDP?
2. For each of the following, answer whether it would affect short-run aggregate supply, long-run aggregate...
2. For each of the following, answer whether it would affect short-run aggregate supply, long-run aggregate supply, both, or neither; and describe whether it would lead to an increase or a decrease. (a) Energy prices decrease (b) A new supply of natural resources is discovered (c) Firms and workers expect the price level to fall (d) New policies increase the cost of meeting new government regulations (e) The number of workers in the labor force increases
Aggregate demand and aggregate supply schedules in Burgazistan are given as follows: Price level Real GDP...
Aggregate demand and aggregate supply schedules in Burgazistan are given as follows: Price level Real GDP demanded Real GDP supplied in the short run 75 600 400 85 550 450 95 500 500 105 450 550 115 400 600 125 350 650 135 300 700 What is the short-run macroeconomic equilibrium GDP level? (5 pts) What is the equilibrium price level? Suppose that the initial equilibrium you found in “a” is at the long run aggregate supply curve and the...
Use the aggregate demand–aggregate supply model to illustrate graphically the impact in the short run and...
Use the aggregate demand–aggregate supply model to illustrate graphically the impact in the short run and the long run of the following changes. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; v. the short-run equilibrium values; and vi. the long-run equilibrium values. Also, state in words what happens to prices and output in the short run and the long run. ii) Climate change causes an increase in...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT