Assume an economy operates in the intermediate range of its aggregate supply curve. For each of the following changes in conditions, state the direction of the effect on: aggregate demand, aggregate supply, price level, real GDP. (a) A decrease in government expenditure in infrastructure (b) A severe recession occurs in a country which has been a major importer of the nation’s exports. (c) The federal government increases business taxes with diagram

Assume an economy operates in the intermediate range of its aggregate supply curve. For each of the following changes in conditions, state the direction of the effect on: aggregate demand, aggregate supply, price level, real GDP. (a) A decrease in government expenditure in infrastructure (b) A severe recession occurs in a country which has been a major importer of the nation’s exports. (c) The federal government increases business taxes with diagram

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1QR

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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
(d) Suppose government spending increases by some amount AGo to become Go+AGo. Show the change in Y and C as a response to this increase in spending.
7. We ran a Vector-autoregresive model with two variables: with dtrade (change in trade balance), doilpr (change in oilpr) with one-lag and the result is as follows: dtrade 1st Lag of Trade Balance 1st Lag of Oil Price doilpr 1st Lag of Trade Balance 1st Lag of Oil Price Coef 0.48 275 0.04 1291 0.02 2939 0.35 7591 Std. Err 0.04 2789 0.02 1304 0.09 2198 0.04 5904 Z- statistic 11. 28 1.9 4 0.2 5 7.7 9 P>| zl 0 0.0 53 0.8 04 0 a) What can you infer from the result? b) Can you say anything about the long-run equilibrium value for change in trade- balance given the result?
Which of the following would cause a leftward shift of aggregate demand?(a) An expectation of increased business regulation and restrictions on the use of technology causes a decrease in investment spending.(b) A decrease in interest rates causes an increase in investment spending.(c) A depreciation of the domestic currency on foreign exchange markets causes an increase in net exports.(d) A decrease in income tax rates results in more disposable income for households and increased consumer spending.
(a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Planned Real GDP Consumption Investment $1,000 $100 1,900 100 2,800 100 3,700 100 $1,000 2,000 3,000 4,000 Government Purchases Net Exports $150 -$50 150 -50 150 -50 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is not at full employment, by how much should government spending increase so that the economy can move to the…
17. Aggregate operations planners seek to match supply and demand at the minimum overall cost and: a) keeping inventories at a minimum. b) hiring when necessary. c) keeping inventories at a maximum. d) by staying within company policy.
The following are variables that may cause shifting of aggregate demand (AD) curve. Discuss the effect of increasing these variables to the aggregate demand. Use graphical approach to demonstrate the effect of increasing of each variable and explain why the AD curve shifted. a) Government expenditure (domestic)
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PRICE LEVEL 160 150 140 130 120 110 100 90 80 0 с 1 d X a 2 3 4 5 REAL GDP (Trillions of dollars) 6 + 7 b H 8 (?) Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the graph, choose Not Shown. Description Short-run aggregate supply (SRAS) when there is a recessionary gap Aggregate demand (AD) Short-run aggregate supply (SRAS) when there is an inflationary gap Short-run aggregate supply (SRAS) when the economy is in long-run equilibrium Long-run aggregate supply (LRAS) a O b O O O с O O O O d O O Not Shown
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.
how can a firm mantain a smooth production schedule even when sales are fluctuating? what are the benefits of a smooth production schedule? what are the costs?