For each of the following economic events, analyze the short-run and long-run transitions of the economy without and withgovernment intervention. For each question, start from the initial long run equilibrium, point A.Gpoint D, point Cpoint E, point BSRASQ10. There is a sudden decrease in oil price. Without government intervention, this would move the economy from point A toin the long runin the short run, then topoint G, point Apoint G, point BAD₂

Short-run equilibrium in an economy occurs at the intersection of SRAS and AD curves. Long-run…

For each of the following economic events, analyze the short-run and long-run transitions of the economy without and with government intervention. For each question, start from the initial long run equilibrium, point A. SRAS, Q10. There is a sudden decrease in oil price. Without government intervention, this would move the economy from point A to in the long run, in the short run, then to point D, point C point E. point B

For each of the following economic events, analyze the short-run and long-run transitions of the economy without and with government intervention. For each question, start from the initial long run equilibrium, point A. SRAS, Q10. There is a sudden decrease in oil price. Without government intervention, this would move the economy from point A to in the long run, in the short run, then to point D, point C point E. point B

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Classical Macroeconomics And The Self Regulating Economy

Section9.3: The Self Regulating Economy

Problem 3ST

See similar textbooks

Similar questions

On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive thansubstituteproducts.Explainwhyaggregatedemand does not increase for the same reason in response to a decrease in the aggregate price level. In other words, whatcausestotalspendingtoincreaseifitisnotbecause goods are now cheaper?
Suppose the economy of the hypothetical country “X” is currently in equilibrium at point A on thegraph. There were two major shocks to the economy in 2020.First shock was related to oil prices; the other was related to consumer confidence about futurebusiness conditions. Oil Shock: The economy X faced a rise in the average price of oil along with the rise of world price ofoil.E) Would an increase in oil prices cause a demand shock or a supply shock? Redraw the diagram toillustrate the effect of this shock by shifting the appropriate curve. What happens to theAggregate output and price level after the shock? (3)F) If policymakers wish to prevent the equilibrium output from changing in response to the oilprice increase, should they use contractionary or expansionary fiscal policy? (Redraw the graphfrom part E and show the change) (4)G) Even if the economy moves back to original Aggregate output, will there be any drawback? (1)Consumer Confidence Index: The Consumer Confidence Index…
Use the graph to answer the question that follows. O Price level W X Y N LRAS W AD1 N At which point on the graph is the economy producing output in equilibrium at its maximum sustainable potential? SRAS AD2 AD3 Real GDP
For each of the three theories for the upward slopeof the short-run aggregate.supply curve, carefullyexplain the following:aA how the econom}' recovers from a recession andreturns to its long-run equilibrium without anypolicy interventionb. what determines the speed of that recovery
b. Starting from the Short Run Equilibrium shown on your1st diagram (2020), show graphically how the Automatic Mechanism will move the economy to a new Long-Run Equilibrium. Label everything. c. Explain the changes in your diagram. Be very specific. If you shift a curve, explain why. If you move along a curve, explain why. The answer is in the PPT.
Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Also in year 2, the cost of lumber used to build homes increases. Which of the following is most likely to be the equilibrium change? Price S 8 E C D 0 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The equilibrium will be at point C before the change in expectations and point B after the change b The equilibrium will be at point A before the change in expectations and point B after the change с The equilibrium will be at point A before the change in expectations and point E after the change d The equilibrium will be at point E before the change in expectations and point C after the change la Quantity
Explain why the following statements are false.a. “The aggregate-demand curve slopes downwardbecause it is the horizontal sum of the demandcurves for individual goods.”b. “The long-run aggregate-supply curve is verticalbecause economic forces do not affect long-runaggregate supply.”
Question 01 Due to COVID-19 situations the oil prices fall in international market. Let’s assume that output starts at its natural level. What happens to the country A's economy (output and price) in the short run? Explain your answer using AS-AD graphs.
IV. Shocks to the Equilibrium 1. Complete the sentences: The equilibrium changes only if These demand and supply curves shift if = 2. The estimated monthly U.S. demand function for avocados is Q 14440p + 20pt, where pt is the price of tomatoes, a substitute for avocados. The estimated supply function is Q 50 + 15p. The initial price of tomatoes is $0.80. Using algebra, determine the initial equilibrium price and quantity of avocados, and then determine how price and quantity change if the price of tomatoes increases by $0.55 to $1.35. =
Which of the graphs represents the state of the economy before this pronouncement? Graph A Graph B True or False: President Roosevelt was trying to decrease aggregate supply. O True False
When the economy is creating less output than its potential, it means: Multiple Choice о O о O contractionary policy needs to be enacted. the government will reduce its spending. the economy is expanding. some resources are unemployed.
37.6% R Give Up? O Hint ment Score: Resources Chec on 5 of 15 <. In 2013, Prussia's aggregate demand curve was determined by the equation M +0= 4%. A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation M +6= 7%. Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph. Which of the factors could have resulted in the change in 14 aggregate demand seen between 2013 and 2014? 13 O an improvement in technology 12 11 an increase in imports 10 a decrease in oil prices 8. AD 2013 O higher consumer confidence 7. 5. -3 -2 -1 3. 6. 10 Real GDP growth rate F12 AD 2014 4. 6, 4. Inflation rate