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

Expert Solution

a) short run aggregate supply would increase.

Energy is used for production and decrease in cost of production leads increase in supply.

b) short run and long run aggregate supply both would increase.

Discovery of new resource is an addition to resources which increase the economy's production capacity. This would increase the supply both in short and long run.

c) short run aggregate supply would increase

When firms and workers expect price to fall, new lower wage rate will be negotiated that would reduce the cost of production and thus increase the supply.

d) short run aggregate supply would decrease

Increase in government regulations discourages firms to enter and produce which reduces the supply.

e) short run and long run aggregate supply, both would increase

Increase in labor force decreases the wage rate and increases the economy's potential to produce. This leads increase in supply both in short and long run.

Rahul Sunny answered 1 year ago

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

Consider an economy described by the following short-run aggregate demand, aggregate supply and long-run aggregate supply...

Consider an economy described by the following short-run aggregate demand, aggregate supply and long-run aggregate supply curve: (short-run aggregate demand curve) P = 200 – Y (short-run aggregate supply curve) P = 40 + Y (long-run aggregate supply curve) Y *= 120 where P = Price Level (price index with base period’s index = 100) and Y = Quantity of Output Draw a diagram below to show equilibrium with P on Y-axis and Y on X-axis by finding equilibrium price...

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.An increase in government purchasesA major decrease in the stock of capitalA trade surplusAn increase in Labor

) Explain whether each of the following events shifts the short-run aggregate supply curve, the aggregate...

) Explain whether each of the following events shifts the short-run aggregate supply curve, the aggregate demand curve, both, or neither. For each event that does shift a curve draw a diagram to illustrate the effect on the economy (you don’t have to send me the graphs, but you should draw them on scratch paper for practice). Households decide to save a larger share of their income. Florida orange groves suffer a prolonged period of below-freezing temperatures. Increased job opportunities...

Unlike aggregate demand, we distinguish between short-run and long-run aggregate supply. Short-run aggregate supply (SRAS) is...

Unlike aggregate demand, we distinguish between short-run and long-run aggregate supply. Short-run aggregate supply (SRAS) is a horizontal curve whereas long-run aggregate supply (LRAS) is vertical. a.) In our model of aggregate supply and demand, we distinguish between short-run and long-run aggregate supply. In the short run, what variable can firms adjust and what variable is fixed? In the long run? b.) Plot the short-run aggregate supply curve, the long-run aggregate supply curve, and the aggregate demand curve below. Label...

Which of the following shifts the short-run, but not the long-run, aggregate supply right?

56. Which of the following shifts the short-run, but not the long-run, aggregate supply right? A. a decrease in the price level B. a decrease in the expected price level C. a decrease in the capital stock D. a decrease in the savings rate 57. Which of the following would cause prices and real GDP to rise in the short run? A. Short-run aggregate supply shifts right. B. Short-run aggregate supply shifts left. C. Aggregate demand shifts right. D. Aggregate demand shifts left.

1. Using the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply...

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.

Illustrate a graph with aggregate demand, short-run aggregate supply and long-run aggregate supply all intersecting. Then,...

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.

Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the process by which...

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.

Some analysts use the short-run and long-run effects on the aggregate demand-aggregate supply model to argue that expansionary monetary policy can't affect employment in the long run because in the short run

Some analysts use the short-run and long-run effects on the aggregate demand-aggregate supply model to argue that expansionary monetary policy can't affect employment in the long run because in the short run, monetary policy shifts the aggregate: demand curve to the left, but over time the increase in prices shifts aggregate supply to the right so that GDP will end up going back to its same level of output with a higher price level. supply curve to the left, but over time...

Question