Aggregate Price Level Output (SRAS) Output (Aggregate Demand) 150 1,000 200 125 800 400 100 600 600 75 400 800 50 200 1,000 A. If the economy experiences “self-correction”, how much would the SRAS curve need to shift in order for the economy to return to full-employment output at 600? What would be the new equilibrium aggregate price level.

Aggregate Price Level Output (SRAS) Output (Aggregate Demand) 150 1,000 200 125 800 400 100 600 600 75 400 800 50 200 1,000 A. If the economy experiences “self-correction”, how much would the SRAS curve need to shift in order for the economy to return to full-employment output at 600? What would be the new equilibrium aggregate price level.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Aggregate Demand And Supply

Section: Chapter Questions

Problem 6SQP

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Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves. Assume the central bank in this economy (the Fed) fixes the quantity of money supplied. Suppose the price level decreases from 150 to 125. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. Money Supply 15 12 4 Money Demand 3 5 10 15 20 MONEY (Billions of dollars) INTEREST RATE (Percent) 18 0 0 25 30 Money Demand Money Supply (?) Following the price level decrease, the quantity of money demanded at the initial interest rate of 9% will be supplied by the Fed at this interest rate. As a result, individuals will attempt to bonds and other interest-bearing assets, and bond issuers will realize that they restored in the money market at an interest rate of than the quantity of money their money holdings. In order to do so, they will interest rates until equilibrium is
Use the following table to answer the questions below. Aggregate Price Level Output (SRAS) Output (Aggregate Demand) 150 1,000 200 125 800 400 100 600 600 75 400 800 50 200 1,000 Graph the aggregate demand (AD) and the short-run aggregate supply (SRAS) curves. Label them AD1 and SRAS1. What are the aggregate output (Y) and the aggregate price level? Assume aggregate demand grows by 200 at each price level. Graph the new AD and label AD2. What are the new aggregate output (Y) and the aggregate price level? If full-employment output is 600, is the economy experiencing recessionary or inflationary pressures? If the economy experiences “self-correction”, how much would the SRAS curve need to shift in order for the economy to return to full-employment output at 600? What would be the new equilibrium aggregate price level.
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The following graph shows an increase in short-run aggregate supply (SRAS) in a hypothetical economy. Specifically, short-run aggregate supply shifts to the right from SRAS₁ to SRAS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. Review the graph and then complete the table that follows. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 50 SRAS SRAS₂ 100 150 200 250 300 350 400 REAL GDP (Billions of dollars) ? The following table lists several determinants of short-run aggregate supply. Complete the table by indicating the change needed in each determinant to increase short-run aggregate supply. Determinant Change Needed to Increase SRAS Input Prices increase or decrease Burdensome Regulations increase or decrease Technology decline or improvement
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Create a graph for a short-run aggregate supply curve. Use the variable ‘Price Level’ for the vertical axis and ‘Real GDP’ for the horizontal axis In your answer, explain why there is a direct relationship between the price level and real GDP. Use your graph to illustrate your explanation. Also, discuss determinants of Aggregate Supply or factors that shift Aggregate Supply curve. (200 to 300 words) .
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