Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check al that apply. The inflation rate The price level The level of technological knowledge The size of the labor force Suppose the economy produces real GDP of $70 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 112 108 104 100 10 20 30 40 50 60 70 80 OUTPUT (Billions of dollars) Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to ,which will: Shift the long-run aggregate supply curve to the right C Shift the long-run aggregate supply curve to the left Not affect the long-run aggregate supply curve PRICE LEVEL

Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check al that apply. The inflation rate The price level The level of technological knowledge The size of the labor force Suppose the economy produces real GDP of $70 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 112 108 104 100 10 20 30 40 50 60 70 80 OUTPUT (Billions of dollars) Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to ,which will: Shift the long-run aggregate supply curve to the right C Shift the long-run aggregate supply curve to the left Not affect the long-run aggregate supply curve PRICE LEVEL

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 12P

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Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force O The level of technological knowledge The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL
3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.
The government of Australia has embarked on various policies such as Job Keeperand provision of subsidies to firms in order to reduce the severity of COVID 19 on theeconomy. Suppose the money supply expands such that the Reserve Bank predictsthat the economic expansion is not sustainable.Use two diagrams one for the money market and another for the goods and services(Aggregate demand and Aggregate Supply model), to explain the policy that theReserve Bank can adopt in order to overcome the effect of increasing money supplyon the economy.Assume that: money supply increased from the equilibrium of AUD 40 billion to AUD 70billion Interest was reduced to interest rate of 1.5% as part of the stimulus packagefor the nation to overcome the effects of COVID 19. But the equilibrium interestrate is 4% Assume that equilibrium real GDP is AUD 60 billion Assume that inflation during COVID crisis was at equilibrium price of CPI 65 Assume that to overcome the inflationary crisis aggregate demand…
Suppose an economy is in long-run equilibrium. The centra bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply * Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O Nominal wages, prices, and perceptions adjust upward to this new price level. The government increases spending to increase aggregate demand. The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in th money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to nominal wages at…
The hypothetical economy represented by the graph is currently experiencing a recession. Suppose the central bank attem to increase the growth rate of the money supply to return the economy to its long-run equilibrium. It is able to move the economy to a new equilibrium but falls short of its goal. Move the aggregate demand curve to demonstrate this scenario. Long-run aggregale supply Short-run aggregate supply Aggregate demand Real GDP growth rate Inflauen rate
During 2017, some Fed officials discussed the possibility of increasing interest rates as a way of fightingpotential increases in expected inflation. If the publiccame to expect higher inflation rates in the future, whatwould be the effect on the short-run aggregate supplycurve? Use an aggregate demand and supply graph toillustrate your answer.
explain what happens in the short run if the Federal Reserve raises interest rates in the economy? Assume that the economy is at full employment before the interest rate increase. Be sure to detail what happens to: aggregate demandthe price levelthe level of GDPand unemployment. (Provide a detailed explanation of the graph provided).
For example, an increase in the money supply,(NORMINAL, REAL) a variable, will cause the price level, a (NORMINAL, REAL) variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a (REAL, NORMINAL) variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as (MONETARY, THE QUANITY, PRICE) .
Assume the Federal Reserve triples the growth rate of the quantity of money in circulation. In the long run, this increase in money growth will affect which of the following? Check all that apply. -The inflation rate -The size of the labor force -The quantity of physical capital -The price level Suppose when unemployment is at its natural rate the economy produces a level of real GDP equal to $70 billion. Using the purple points (diamond symbol) plot the economy's long-run aggregate supply (LRAS) curve on the graph. Suppose now the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. This change in policy will cause the natural rate of unemployment to (increase/fall/decrease) , which will: - Shift the long-run aggregate supply curve to the right - Not impact the long-run aggregate supply curve - Shift the long-run aggregate supply curve to the left…
What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant. a. The expectation of rapid inflation b. A 10 percent reduction in personal income tax rates c. A sizable increase in labor productivity (with no change in nominal wages) d. A 12 percent increase in nominal wages (with no change in productivity) e. Depreciation in the international value of the dollar.
Suppose that the Federal Reserve wants to reduce the money supply. Using our model of the money market, investment, and aggregate demand and aggregate supply, explain the how a reduction of the money supply will influence the price level and real GDP, assuming that the economy is operating in the moderate unemployment range of aggregate supply.
In the figure at right, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD3, then the new short-run equilibrium will be at point A. i. O B. c. C. b. D. a. Price Level 130 120 100 e b LRAS 9 с SRAS₁ SRAS₂ AD₁ Real GDP per Year ($ trillions) SRAS3 AD3 AD₂