4. 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, note the direction. • Households decide to save a larger share of their income. • Florida orange groves suffer a prolonged period of below-freezing temperatures. Increased job opportunities overseas cause many people to leave the country. A pandemic causes 500,000 deaths and millions infected.

4. 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, note the direction. • Households decide to save a larger share of their income. • Florida orange groves suffer a prolonged period of below-freezing temperatures. Increased job opportunities overseas cause many people to leave the country. A pandemic causes 500,000 deaths and millions infected.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 8PA

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11. Explain why the following statements are false. A.) “The aggregate-demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods.” B.) “The long-run aggregate-supply curve is vertical because economic forces do not affect long-run aggregate supply.” C.) “If firms adjusted their prices every day, then the short-run aggregate-supply curve would be horizontal.” D.) “Whenever the economy enters a recession, its long-run aggregate-supply curve shifts to the left.”
1. How is the aggregate demand curve different from the demand curve for a single good, like hamburgers?
1. How is the aggregate demand curve different from the demand curve for a single good, like hamburgers? 2. Why does the aggregate demand curve slope downward? 3. How does an increase in foreign income affect domestic aggregate expenditures and demand? 4. How does a decrease in foreign price levels affect domestic aggregate expenditures and demand? 5. How is the aggregate supply curve different from the supply curve for a single good, like pizza?
4) Draw a graph that plots Short-run Aggregate Supply, Long.Run Aggregate Supply, and Aggregate Demand. Indicate the equilibrium point on the graph. Then, explain the shifts of the curves and the movement of equilibrium under the following events. 1. Government increases the income taxes 2. The war in Libya increases the price of oil globally
Question 1. Explain why the Aggregate Demand curve is downward sloping . 2. Explain why the Aggregate Supply curve is upward sloping . 3. What determines potential output Yf, and how can the economy exceed Yf in the short run? 4. Explain the Equilibrium condition of Aggregate Expenditure= output Y. How are inventory changes related to AE and Y? 5. Define the multiplier and the marginal propensities to consume (MPC) and save (MPS). What is the relationship between the MPC and the multiplier? 6. Compare and contrast the short run Keynesian and long run Neoclassical views of the aggregate supply and Phillips curves 7. For each the following economies, calculate equilibrium Y*, the multiplier, and the size of the recessionary or inflationary gap, if any. a. AE= 250 +.75 Y Yf= 1200 b. AE= 400+ .9 Y Yf= 3000 c. AE= 300 +. 8Y Yf=1500 d. AE= 300+ .67 Y Yf=1000
2. How does each of the following affect the aggregate demand curve? a. Government spending increases. b. The amount of taxes collected decreases.
8. Do the following events have their initial impact on aggregate demand, long run aggregate supply, or short run aggregate supply? Do the curves shift to the right or to the left? Show, using a graph for each question. a. The new government in Canada increases income taxes. AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: b. There has been an increase in investment in postsecondary education in Canada AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: c. Canada experiences downward pressure on nominal wages. AD/AS/LRAS: Equilibrium Price:, Equilibrium Quantity: 9 6
3. Explain how each of the following will affect aggregate demand. In each case, draw a diagram to show the effect on the aggregate demand curve. (a) Negative economic indicators cause firms to become pessimistic about the future of the economy. (b) Banks become complacent and begin taking on riskier business loans at lower interest rates. (c) The government passes legislation that increases the rate of corporate taxes. (d) Inflation leads the central bank to increase the base interest rate.
5. How is the aggregate supply curve different from the supply curve for a single good, like pizza?
4) Draw a graph that plots Short-run Aggregate Supply, Long.Run Aggregate Supply, and Aggregate Demand. Indicate the equilibrium point on the graph. Then, explain the shifts of the curves and the movement of equilibrium under the following events. 1. Government increases the income taxes 2. The war in Libya increases the price of oil globally 3. The lack of raw materials causing shortage of electronic chips used in many consumer electronics 4. New economic policy that attracts more investment Draw a new graph for each of these policy analysis. Show the movements of curves clearly. Explain the short run and the long run impact of each policy with a few sentences.
An increase in consumer confidence in a country will result in a 1.shift of the aggregate demand curve to the right. 2.shift of the aggregate demand curve to the left. 3.movement up the aggregate demand curve to a lower aggregate output. 4.movement down the aggregate demand curve to a higher aggregate output.
3. Currently, there is world-wide shortage of computer microchips.Determine the effects on: a. Supply of Toyota automobiles made in Ontario. b. Supply of peanuts grown in SouthwesternOntario. c. Demand for automobiles in Canada. d. GDP in Canada. e. Short-run aggregate demand and aggregate supply in Canada’s economy.