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5. The slope and position of the long-run aggregate supply curve

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.
Suppose when unemployment is at its natural rate the economy produces a level of real GDP equal to $60 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 significantly increases the minimum wage. This change in policy will cause the natural rate of unemployment to    , which will:
Complete the following table by determining how each event impacts the position of the long-run aggregate supply (LRAS) curve.
Direction of LRAS Curve Shift
A government-sponsored training program increases the skill level of the workforce.    
The government allows more immigration of working-age adults who find work.    
A scientific breakthrough significantly increases food production per acre of farmland.    

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 rateThe quantity of physical capitalThe price levelThe level of technological knowled...

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Posted by Cleveland on September 16, 2024
The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1 to AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion.
The following table lists several determinants of aggregate demand.
Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand.
Change Required to Increase AD
Expected rate of return on investment    
Incomes in other countries    
Wealth    
Taxes    

Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand.Change Required to Increase ADExpected rate of return on investmentIncrease   Incomes in other countriesIncrease   WealthIncrease   TaxesDecrease &nbs...

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Posted by Cleveland on September 16, 2024

3. Why the aggregate demand curve slopes downward

The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $500 billion, and the price level is 120. Moving up along the AD curve from point X to point Y, the quantity of output demanded falls to $300 billion, and the price level rises to 140.
As the price level rises, the purchasing power of households' real wealth will    , causing the quantity of output demanded to    . This phenomenon is known as the    effect.
Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar to    in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore    , and the number of foreign products purchased by domestic consumers and firms (imports) will    . Net exports will therefore    , causing the quantity of domestic output demanded to    . This phenomenon is known as the    effect.

As the price level rises, the purchasing power of households' real wealth willfall   , causing the quantity of output demanded tofall   . This phenomenon is known as thewealth   effect.Points:1 / 1Close ExplanationExplanation:Households often hold some of their wealth i...

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Posted by Cleveland on September 16, 2024
A majority of economists believe that in the long run, real economic variables and nominal economic variables behave independently of one another.
For example, an increase in the money supply, a    variable, will cause the price level, a    variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a    variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as    .
However, in the short run, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggregate supply (AS) diagram—it needs appropriate labels for the axes and curves. In the questions that follow you will identify some of the missing labels.
The aggregate    curve shows the quantity of goods and services that firms produce and sell at each price level.
The horizontal axis of the aggregate demand and aggregate supply model measures the overall    .

A majority of economists believe that in the long run, real economic variables and nominal economic variables behave independently of one another.For example, an increase in the money supply, anominal   variable, will cause the price level, anominal   variable, to increase but wi...

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Posted by Cleveland on September 16, 2024
he graph included below approximates United States business cycles between quarter one of 1955 and quarter three of 1959. The shaded region denotes periods of six or more consecutive months of declining real gross domestic product (real GDP).
Source: “Current-dollar and Real GDP,” Bureau of Economics Analysis, last modified May 1, 13, accessed May 15, 13, http://www.bea.gov/national/xls/gdplev.xls.
Notice that real GDP trends upward over time but experiences ups and downs in the short run. These short-run fluctuations in real GDP are often referred to as    .
True or False: Short-term fluctuations in real GDP are irregular and unpredictable.
Which of the following probably occurred as the U.S. economy experienced declining real GDP in 1957?  Check all that apply.

Notice that real GDP trends upward over time but experiences ups and downs in the short run. These short-run fluctuations in real GDP are often referred to asthe business cycle   .Points:1 / 1True or False: Short-term fluctuations in real GDP are irregular and unpredictable.TrueFalsePoints...

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Posted by Cleveland on September 10, 2024
Policymakers are said to "accommodate" an adverse supply shock if they _______.

a. respond to the adverse supply shock by increasing aggregate demand, which further raises prices...

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Posted by Cleveland on September 10, 2024
According to the model of aggregate supply and aggregate demand, in the long run, an increase in the money supply should cause _______.

c. prices to rise and output to remain unchanged...

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Posted by Cleveland on September 10, 2024

se the exhibit to answer the questions 17–18.

Suppose the economy is operating in a recession such as point B in the graph. If policymakers allow the economy to adjust to the long-run natural level on its own, _______.


d. people will reduce their price expectations and the short-run aggregate supply will shift right...

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Posted by Cleveland on September 10, 2024

se the exhibit to answer the questions 17–18.

Suppose the economy is operating in a recession such as point B in the graph. If policymakers wished to move output to its long-run natural level, they should attempt to _______.

...

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Posted by Cleveland on September 10, 2024
Which of the following events shifts the short-run aggregate-supply curve to the right?

c. A drop in oil prices...

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Posted by Cleveland on September 10, 2024