Which of the following are conditions forthe Complex Aggregate Supply andAggregate Demand Model?Choose all that apply.Group of answer choicesThe change in potential real GDPdetermines the change in theunemployment rate.All three curves must shift.Long run equilbrium determines thechange in real GDP and inflation.The relative magnitudes of each of theshifts must be specified.The change in the (output) gapdetermines the change in theunemployment rate.At least one curve must shiftShort-run equilbrium determines thechange in real GDP and inflation.

The Complex Aggregate Supply and Aggregate Demand (AS-AD) Model is a fundamental concept in…

Answered: Which of the following are conditions…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1P

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Explain whether each of the following events shiftsthe short-run aggregate-supply curve, the aggregatedemand curve, both, or neither. For each event thatdoes shift a curve, draw a diagram to illustrate theeffect on the economy.a. Households decide to save a larger share of theirincome.b. Florida orange groves suffer a prolonged period ofbelow-freezing temperatures.c. Increased job opportunities overseas cause manypeople to leave the country.
For each of the three theories for the upward slopeof the short-run aggregate-supply curve, carefullyexplain the following:a. how the economy recovers from a recession andreturns to its long-run equilibrium without anypolicy interventionb. what determines the speed of that recovery
Illustrate and interpretthe short-run andlong-run aggregatesupply curves
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. (a) An increase in government expenditure in infrastructureClick or tap here to enter text.(b) A severe recession occurs in a country, which has been a major importer of thenation’s exports.Click or tap here to enter text.(c) The federal government increases business taxesClick or tap here to enter text.(d) The Central Bank increases the cash interest rate
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. a) The Central Bank increases the cash interest rate i need ans of this too.
When the economy is experiencing a recession, why would aneoclassical e conomist be unlikely toargue for aggressive policy to stimulate aggregate demandand return the economy to full employment? Explain your answer.
Theshortrunaggregatesupplycurvewasconstructedassumingthatasthepriceofoutputsincreases,thepriceof inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
Suppose the economy is in a long-run equilibrium.a. Draw a diagram to illustrate the state of theeconomy. Be sure to show aggregate demand,short-run aggregate supply, and long-runaggregate supply.b. Now suppose that a stock market crash causesaggregate demand to fall. Use your diagramto show what happens to output and the pricelevel in the short run. What happens to theunemployment rate?c. Use the sticky-wage theory of aggregate supplyto explain what happens to output and the pricelevel in the long run (assuming no change inpolicy). What role does the expected price levelplay in this adjustment? Be sure to illustrate youranalysis in a graph.
Suppose, initially the Australian economy is atfull employment(in other words the economy is atthe potentialGDP). Using AD-AS model, explain how would each of the following events aectthe economy both in theimmediate and in the long term.a) A slowdown in China’s economic growth due to the sub-prime crisis in the US.b) Union wage settlements push the wage rate up.c) An increase in consumer confidence.
In the diagram, the economy has Aggregate price level LRAS SRAS, P, Aggregate Demand Yp Y, Real GDP An inflationary gap, so in the long run wages will fall, causing AD curve ti shift to the left. An inflationary gap, so in the long run wages will rise, causing the SRAS curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the AD curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the SRAS curve to shift to the right.
Initialy, the chot run aggregate suply curve is SASO and the gte dand ose LAS SAS, 115 SAS 110 105 100 95 0.8 Reol GOP rilions of 2005 dollan 1.0 1.2 Using the above graph, amwer the following questions 1. Some events change aggregate demand from ADO to AD1 dentily two events that cot t othe ch demand. What is the equlitrium ater aggregate demand changed it poental GPn51n eonyt makroeconomic equilitrium? 2. Some events change apgregate supply hrom SASO to SAS1. Recogriae teo vert Dat cd ho eet t chrge supply. What is the equilibrlum after aggregate supply changed It potertial GDP in $1 tlion, den the aruny kae inflationary gap, a recessionary gap or no output gap? 3. Some events change aggregate demand fom ADO to ADI and aggrgale supy m SASO o SAS S macroeconomic equilibrium

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