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...
If aggregate demand decreases and short run aggregate supply
remains the same then what will happen to price levels? Group of
answer choices
A) Stay the same
B) Increase
C) Decrease
D) Remain constant
2) If short run aggregate supply decreases and aggregate demand
stays the same then what happens to price levels?
Group of answer choices
A) Increase
B) Decrease
C) Stay the same
D) Remain constant
3) Which of the following best describes the economy during time
of...
Illustrate a graph with aggregate demand, short-run aggregate
supply and long-run aggregate supply all intersecting. Then, show
what happens in the short-run when the government increases taxes.
What happens to the price level and output in the short-run?
Finally, adjust the short-run aggregate supply curve so that we are
back in long-run equilibrium. What is the long-run effect of the
increased taxation on output and the price level? Be sure to
include your illustrations.
1. Using the aggregate demand (AD), the short-run aggregate
supply (SRAS), and the long-run aggregate supply (LRAS) curves,
briefly explain how an open market purchase will affect the
equilibrium price level (P) and real output (Y) in the short run.
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.
Using aggregate demand, short-run aggregate supply, and
long-run aggregate supply curves, explain the process by which each
of the following government policies will move the economy from one
long-run macroeconomic equilibrium to another. Illustrate with
diagrams. In each case, what are the short-run and long-run effects
on the aggregate price level and aggregate output?
There is an increase in taxes on households.
There is an increase in the quantity of money.
There is an increase in government spending.
2. [Monetary Policy] (a) Using the aggregate demand-aggregate
supply model, explain and demonstrate graphically the short-run and
long-run effects of a decrease in the money supply.
(b) Using the aggregate demand-aggregate supply model, explain
and demonstrate graphically the short-run and long-run effects of a
temporary negative supply shock.
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 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.
Using aggregate demand, short-run (SR) aggregate supply, and
long-run (LR) aggregate supply curves, explain the process by which
each of the following economic events will move the economy from an
original LR (and SR) equilibrium (eq) to a new SR eq, and to a new
LR (and SR) eq. Illustrate with diagrams.
There is a decrease in households’ wealth due to a decline in
the stock market.
The government lowers taxes, leaving households with more
disposable income.
Using the Aggregate Demand-Aggregate Supply graphical analysis,
show what happens in the short and long-run if the fiscal policy
authorities increase government spending. Start your analysis in
long-run equilibrium and label this point A. Does crowding out
happen here? Explain.