Question

Using the aggregate demand curve and the inflation adjustment line, describe what would happen to real...

Using the aggregate demand curve and the inflation adjustment line, describe what would happen to real GDP and inflation in the short run, in the medium run, and in the long run if the government increased spending permanently. Assume that the economy was initially at potential output before the increase. Be sure to provide an economic explanation for your results.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
11.   Demand-pull inflation occurs when the aggregate __________ curve shifts _______. A.   demand, right B.    demand, left C.    supply, right...
11.   Demand-pull inflation occurs when the aggregate __________ curve shifts _______. A.   demand, right B.    demand, left C.    supply, right D.   supply, left 12.   When the aggregate price level decreases, the resulting decrease in interest rates will most likely ___________ investment and _____________ consumption. A.   increase, increase B.    increase, decrease C.    decrease, increase D.   decrease, decrease 13.   The economy is operating at full capacity.  The long-run aggregate supply curve is __________.  In the long run, an increase in the aggregate price level will __________ output. A.   horizontal, increase B.    horizontal, not change C.    vertical, increase D.   vertical,...
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate...
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States. The graph needs to be clearly labeled and explained carefully. Make sure that the graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply curve (LRAS, Potential GDP) curve.
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate...
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States as of July 2020. The graph must be clearly labeled and explained carefully. Make sure that the graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply curve (LRAS, Potential GDP) curve.
The aggregate demand curve shows the relationship between the aggregate price level and: A) aggregate productivity....
The aggregate demand curve shows the relationship between the aggregate price level and: A) aggregate productivity. B) the aggregate unemployment rate. C) the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world. D) the aggregate quantity of output demanded by businesses only. 2.When the aggregate price level increases, the purchasing power of many assets falls, causing a decrease in consumer spending. This is known as the _____ effect and is a reason why...
1. Suppose the economy has the aggregate demand curve ? = 3000 + 4( ? ?...
1. Suppose the economy has the aggregate demand curve ? = 3000 + 4( ? ? ) and the price adjustment schedule. ? = 0.6?−1 + 0.5( ?−1−6000 6000 ). The money supply, M, is 800. The price level is denoted P, real output Y, and inflation . Assume the economy has zero inflation initially ( π0 = 0). The initial price ( P0 ) is 1 and initial output ( Y0 ) is 6200. a. What does potential GDP...
The following table gives an example of an inflation adjustment line. Real GDP (percent deviation from...
The following table gives an example of an inflation adjustment line. Real GDP (percent deviation from potential GDP) Inflation (percent per year) 3.0 2.0 2.0 2.0 1.0 2.0 0.0 2.0 -1.0 2.0 -2.0 2.0 -3.0 2.0 Sketch the line in a graph. If real GDP is above potential GDP, will the inflation adjustment line shift up or down? Explain. In the same graph as part (a), sketch in the aggregate demand curve given in Problem 5. Find the equilibrium level...
Suppose potential GDP is $5,000 billion. Use the data below to graph the aggregate demand curve....
Suppose potential GDP is $5,000 billion. Use the data below to graph the aggregate demand curve. Inflation (percent) 5 4 3 2 1 Real GDP (billions of dollars) 4800 4900 5000 5100 5200 1.Suppose the current inflation rate is 2 percent. Draw the inflation adjustment line. What is the current value of real GDP? 2.In the long run, what will the inflation rate be if economic policy does not change? Explain how this adjustment takes place.
The adjustment of the economy to potential real GDP in the long run from a level...
The adjustment of the economy to potential real GDP in the long run from a level of real GDP above potential real GDP occurs as nominal wages​ ________, shifting the​ short-run aggregate supply curve to the​ ________. A. ​fall; left B. ​fall; right C. ​rise; right D. ​rise; left
consider the macroeconomic AD-AS model with an aggregate demand curve and a short-run aggregate supply curve....
consider the macroeconomic AD-AS model with an aggregate demand curve and a short-run aggregate supply curve. assume that changes in national output also represent changes in real GDP. a. use the AD-AS model to explain and illustrates the differences between demand-side measures and supply-side measures and give an example of each. you also need to mention which markets are embedded within each curve. b. use the AD-AS model to analyse and illustrate the short run impact of an increase in...
An increase in aggregate demand (AD) can cause a recession in the economy. an increase in...
An increase in aggregate demand (AD) can cause a recession in the economy. an increase in cyclical unemployment. an expansion in the economy. Flag this Question Question 22 pts Economic growth is shown in the AS-AD model as a leftward shift in the short run AS curve. rightward shift in the AD curve. rightward shift in the long run AS curve. Flag this Question Question 32 pts In the long run, the most important factor that shifts the aggregate supply...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT