A hypothetical economy in equilibrium is suffering from unemployment caused by too much output and too...
A hypothetical economy in equilibrium is suffering from unemployment caused by too much output and too little spending. Business inventories are accumulating. Current production is being cut and workers are being laid off creating unemployment. Identify the gap that exists in this economy. (Use this information to answer the following 6 questions) Recessionary Gap Inflationary Gap
Homework Answers
As the inventory are rising and the demand is low the economy must be facing a recessionary gap in the market, To decrease that gap the government has to increase the expenditure and that will increase the demand and raise the level of output.
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A hypothetical economy in equilibrium is suffering from
unemployment caused by too much output and too...
2. The following table has aggregate demand and aggregate supply for a hypothetical economy. The MPC...
2. The following table has aggregate demand and aggregate supply for a hypothetical economy. The MPC is 0.8. Amount of real domestic output demanded (billions) Price level (price index) Amount of real domestic output supplied (in billions) $300 $300 $700 400 250 600 500 200 500 600 150 400 700 100 300 In the short run, what are the economic equilibrium price level and the equilibrium real output? If the GDP of this country is at a natural rate of...
equilibrium output to S6 trillion. AS) that t. What is the price level at this new...
equilibrium output to S6 trillion. AS) that t. What is the price level at this new equilibrium? Chapter 12 Draw a graph to illustrate the desired aggregate expenditures of an economy whose participants have the following spending plans: 1. С $10+0.SY İ $20 G $30 X-M-$10 (a) What is the value of equilibrium output? (b) How much are consumers saving at equilibrium? (c) How much nonconsumer spending is being injected? (d) Assuming that the full-employment level of output is S300,...
Question 6 (2 points) If equilibrium output and income (Y) is 1,000 less than potential output...
Question 6 (2 points) If equilibrium output and income (Y) is 1,000 less than potential output at full employment (Y), and the marginal propensity to consume is 0.8, how much additional autonomous spending is needed to reach full employment (that is, what is the recessionary gap)? If the government decreased total taxes out of income (T), how much would the tax cut have to be to bring the economy to full employment? Question 72 points) Circle the correct set of...
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as...
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as being 10% when in fact it was 12%, it might cause O A. consumers to spend more than they intended, because the Bank of Canada misled them about the unemployment rate. O B. a reduction in the natural rate of unemployment, because it would be allowing inflation to occur. O c. a one-time reduction in unemployment, because of a one-time increase in the money...
7. Effects of an active or passive policy
7. Effects of an active or passive policy The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve SRAS), and the long-run aggregate supply curve (LRAS) for a hypothetical economy. Suppose the economy is in short-run equilibrium. The _______ of $4 trillion drives unemployment _______ the unemployment rate consistent with full-employment output. Suppose public officials are concerned about the $4 trillion gap in the economy and the resulting lower-than-expected aggregate demand. The government has decided to follow an active...
Refer to the diagram that shows an ADIAS model fora hypothetical economy The economy begins in...
Refer to the diagram that shows an ADIAS model fora hypothetical economy The economy begins in long-run equilibrium at point A AS1 Following the positive AS shock shown in the diagram, the adjustment process will take the economy to a long-run equilibrium where the price level is AS2 and real GDP is O A. 100; 750 B. 70; 500 O C. 50; 850 O D. 50; 950 O E. 70; 750 100 . 70 50 AD 500 750 850 Real...
1.In the neoclassical view of the economy, expansionary fiscal policy cannot work to raise equilibrium output...
1.In the neoclassical view of the economy, expansionary fiscal policy cannot work to raise equilibrium output because it will raise unemployment. it will disincentivize production. flexible prices will eventually choke off any increase in aggregate demand. 2.Autonomous expenditure does NOT depend on what factor? Consumer spending Future expectations GDP/output 3. Each of the following statements are about government spending as function of national income. Which one of the statements is a false statement? On a Keynesian cross diagram the government...
I’m lost on all of these can some one please explain them. ( practice test )...
I’m lost on all of these can some one please explain them. (
practice test )
15) The "nalve" Keynesian model is unrealistic because it A) Assumes that AS is upward sloping when it is more probably horizontal. B) Assumes that the price level decreases as AD increases. C) Does not account for changes in output due to the multiplier. D) Does not take into account probable changes in the price level as the economy 均 approaches full employment. 16)...
U PLS (SLO/EO: 11a) If the U.S. dollar depreciates relative to currencies in other countries, then...
U PLS (SLO/EO: 11a) If the U.S. dollar depreciates relative to currencies in other countries, then U.S. imports will and exports will increase; increase decrease, decrease decrease; increase increase; decrease Question 30 3 pts (SLO/EO: 6,12) Long recessions often follow banking crises because: banking crises may cause a surplus of credit, so that interest rates fall to levels so low that investors earn very little in interest income. the vicious cycle of deleveraging that follows leads to overpriced assets. consumer...
13. The reason for the multiplier effect is that a. one person's additional expenditure constitutes a...
13. The reason for the multiplier effect is that a. one person's additional expenditure constitutes a new source of income for another person, and this additional income leads to still more spending, and so on. b. changes in government spending typically deepen recessions or exacerbate inflationary conditions in the economy. c. businesses make decisions about investment projects based on anticipated profits. d. additional spending lowers the real interest rate and leads to further borrowing and spending by businesses. 14. If...
equilibrium output to S6 trillion. AS) that t. What is the price level at this new equilibrium? Chapter 12 Draw a graph to illustrate the desired aggregate expenditures of an economy whose participants have the following spending plans: 1. С $10+0.SY İ $20 G $30 X-M-$10 (a) What is the value of equilibrium output? (b) How much are consumers saving at equilibrium? (c) How much nonconsumer spending is being injected? (d) Assuming that the full-employment level of output is S300,...
Question 6 (2 points) If equilibrium output and income (Y) is 1,000 less than potential output at full employment (Y), and the marginal propensity to consume is 0.8, how much additional autonomous spending is needed to reach full employment (that is, what is the recessionary gap)? If the government decreased total taxes out of income (T), how much would the tax cut have to be to bring the economy to full employment? Question 72 points) Circle the correct set of...
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as being 10% when in fact it was 12%, it might cause O A. consumers to spend more than they intended, because the Bank of Canada misled them about the unemployment rate. O B. a reduction in the natural rate of unemployment, because it would be allowing inflation to occur. O c. a one-time reduction in unemployment, because of a one-time increase in the money...
Refer to the diagram that shows an ADIAS model fora hypothetical economy The economy begins in long-run equilibrium at point A AS1 Following the positive AS shock shown in the diagram, the adjustment process will take the economy to a long-run equilibrium where the price level is AS2 and real GDP is O A. 100; 750 B. 70; 500 O C. 50; 850 O D. 50; 950 O E. 70; 750 100 . 70 50 AD 500 750 850 Real...
I’m lost on all of these can some one please explain them. (
practice test )
15) The "nalve" Keynesian model is unrealistic because it A) Assumes that AS is upward sloping when it is more probably horizontal. B) Assumes that the price level decreases as AD increases. C) Does not account for changes in output due to the multiplier. D) Does not take into account probable changes in the price level as the economy 均 approaches full employment. 16)...
U PLS (SLO/EO: 11a) If the U.S. dollar depreciates relative to currencies in other countries, then U.S. imports will and exports will increase; increase decrease, decrease decrease; increase increase; decrease Question 30 3 pts (SLO/EO: 6,12) Long recessions often follow banking crises because: banking crises may cause a surplus of credit, so that interest rates fall to levels so low that investors earn very little in interest income. the vicious cycle of deleveraging that follows leads to overpriced assets. consumer...
13. The reason for the multiplier effect is that a. one person's additional expenditure constitutes a new source of income for another person, and this additional income leads to still more spending, and so on. b. changes in government spending typically deepen recessions or exacerbate inflationary conditions in the economy. c. businesses make decisions about investment projects based on anticipated profits. d. additional spending lowers the real interest rate and leads to further borrowing and spending by businesses. 14. If...
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