Question 9 Long-term economic growth is illustrated in the AD/AS framework by a gradual shift of the aggregate supply curve to the left. True False Question 10 The neoclassical zone occurs at the right of the SRAS curve where it is fairly vertical, and so movements in AD will affect the price level, but have little impact on output. True False

Question 9 Long-term economic growth is illustrated in the AD/AS framework by a gradual shift of the aggregate supply curve to the left. True False Question 10 The neoclassical zone occurs at the right of the SRAS curve where it is fairly vertical, and so movements in AD will affect the price level, but have little impact on output. True False

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 39RQ: What is the neoclassical zone of the SRAS curve? How much is the output level likely to change in...

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How is long-term growth illustrated in an AD/AS model?
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
6.1.What is an AD-AS model and what does such a model as per the givendiagram essentially focus on?6.2.Discuss the diagram in detail by first explaining what leads to step Step 1(representing a shift in curves on the diagram) and indicating what occursto cause shifts in some of the curves. Then discuss Step 2 (whichrepresents other macroeconomic changes) and indicate what happens toother variables when there are shifts in some of the curves as per Step 1. 6.3.What, in general, do the points of intersection between the AS and AS2curves and the AD curve show?6.4.When the LAS curve moves to the right to LRAS2, what exactly do thepoints of intersection between the AS and AS curves and the AD1 curve,indicated as point 1 and point 2, reflect on the diagram?
Assume that an economy is initially operating at the natural rate of output (full employmentoutput). Use the AD-AS model to illustrate graphically the effects on price and output of areduction in government spending. Explain your assumptions with respect to the range ofaggregate supply of your analysis.
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.
LRAS ADn SRAS ADi Pn Neoclassical zone ADk En Ei Intermediate zone Pk Ek Keynesian zone Yk Yi Yn Real GDP Say's Law states that supply creates its own demand. In the neoclassical zone on the graph above, supply is at its potential GDP, at full capacity. When aggregate supplies have reached their full potential output, what happens if demand shifts to the right? Select one: a. The GDP deflator shifts up and to the left. b. The aggregate supply outputs increase and LRAS shifts to the right. c. The aggregate demand prices increase as AD shifts to the right. d. The aggregate demand prices decrease as AD shifts to the right. Price Level
1. a) Construct the AD-AS model showing AD, short run AS and long run AS intersecting at the potential output level and label this intersection Eo. Assume that this represents the Philippine economy before the pandemic. b) From the initial condition, illustrate in your graph how the pandemic affected the economy in the short run (was there a demand shock or supply shock or both)? c) Explain the reason for the shift in the curve or curves? d) Explain how the changes in the AD-AS model above have affected equilibrium real GDP, unemployment, and price level.
Y5 Consider an AS-AD model for the U.S. Suppose an economic expansion in Mexico increases income for the average Mexican household. Mexico is a large trading partner with the US. This expansion would cause: a. the U.S. price level to rise and real GDP to fall. b. the U.S. price level and real GDP to increase. c. the U.S. price level to fall and real GDP to rise. d. the U.S. price level and real GDP to fall.
Assume that an economy is initially operating at the natural rate of output (full employmentoutput). Use the AD-AS model to illustrate graphically the effects on price and output of anincrease in government spending. Explain your assumptions with respect to the range ofaggregate supply of your analysis.
Now assume that the contraction in the Singaporean economy is mainly driven by supply side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words
n the AD-AS model, assume that an economy’s aggregate demand, denoted by QD=400−P, and SR aggregate supply, denoted by QS=P, currently intersect at price level = $200 and the full employment output level = 200. What curve would have shifted if a new short-run equilibrium were to occur at an output level of 300 and a price level of $300? Group of answer choices SRAS shifts leftward. AD shifts leftward. SRAS shifts rightward. AD shifts rightward.
Suppose, initially the Australian economy is at full employment (in other words the economyis at the potential GDP). Using AD-AS model, explain how would each of the following eventsaffect the economy both in the immediate and in the long term.a) A slowdown in China’s economic growth due to the sub-prime crisis in the US