Question

please answer all questions 11. Demonstrate graphically and explain verbally the impact of a decrease of...

please answer all questions

11. Demonstrate graphically and explain verbally the impact of a decrease of 50 in government spending on the AD curve in the diagram when the multiplier is 3.

12. Using an AS/AD diagram, demonstrate graphically and explain verbally the short-run impact on the price level and real output of an increase in the labor productivity schedule.

13. Assuming the economy is in long-run equilibrium, using an AS/AD diagram, demonstrate graphically and explain verbally the long-run impact on the price level and real output of an expectation by business executives of a recession in the near future.

14. Demonstrate graphically and explain verbally a recessionary gap. Describe two solutions for closing the gap.

15. Demonstrate graphically and explain verbally the case of an inflationary gap. Describe the forces in the economy that will result in the gap closing itself.

Homework Answers

Answer #1

(11)

Spending multiplier = Change in aggregate demand / Change in government spending

3 = Change in aggregate demand / (-50)

Change in aggregate demand = 3 x (-50) = -150

Therefore, aggregate demand will decrease by 150. This will shift the AD curve leftward by 150 units, decreasing price level and decreasing real GDP.

In following graph, AD0 and SRAS0 are initial aggregate demand and short-run aggregate supply curves intersecting at point A with initial price level P0 and initial real GDP Y0. When AD falls by 150, AD0 shifts left to AD1, intersecting SRAS0 at point B with lower price level P1 and lower real GDP Y1, where (Y0 - Y1) equals 150.

NOTE: As per Answering Policy, 1st question is answered.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assuming the economy is in long-run equilibrium, using an AS/AD diagram, demonstrate graphically and explain verbally...
Assuming the economy is in long-run equilibrium, using an AS/AD diagram, demonstrate graphically and explain verbally the long-run impact on the price level and real output of an expectation by business executives of a recession in the near future.
Using an AS/AD diagram, demonstrate graphically and explain verbally the short run impact on the price...
Using an AS/AD diagram, demonstrate graphically and explain verbally the short run impact on the price level and real output of overall technological change.
Demonstrate graphically and explain verbally a recessionary gap. Describe two solutions for closing the gap.
Demonstrate graphically and explain verbally a recessionary gap. Describe two solutions for closing the gap.
1A. Graphically illustrate and carefully explain the impact of a general expectation of rapid inflation on...
1A. Graphically illustrate and carefully explain the impact of a general expectation of rapid inflation on the economy’s equilibrium price and real output in the short-run, assuming that the price level is flexible both upward and downward. 1B. Graphically illustrate and explain the impact of a decrease in aggregate demand on the economy’s equilibrium price and real output, assuming that the economy is currently operating at its full-employment output level and the price level is flexible upward but not downward....
Answer this question NOW* 1. Graphically illustrate and carefully explain the impact of a general expectation...
Answer this question NOW* 1. Graphically illustrate and carefully explain the impact of a general expectation of rapid inflation on the economy’s equilibrium price and real output in the short-run, assuming that the price level is flexible both upward and downward.
Answer This Now*** 2. Graphically illustrate and explain the impact of a decrease in aggregate demand...
Answer This Now*** 2. Graphically illustrate and explain the impact of a decrease in aggregate demand on the economy’s equilibrium price and real output, assuming that the economy is currently operating at its full-employment output level and the price level is flexible upward but not downward. How would theanalysis be different if the price level is flexible downward?
A. Demonstrate graphically and explain verbally where the level of output should be when a perfectly...
A. Demonstrate graphically and explain verbally where the level of output should be when a perfectly competitive firm is earning a positive economic profit. Be sure to label the profit-maximizing level of output and shade in the area that represents profit. B. Show and explain the situation in which a profit-maximizing, perfectly competitive firm is earning a negative profit and chooses to continue to produce in the short-run. C. Show and explain how B would change if the firm chose...
Please, draw Aggregate Demand, Short Run Aggregate Supply, and Long Run Aggregate Supply as if an...
Please, draw Aggregate Demand, Short Run Aggregate Supply, and Long Run Aggregate Supply as if an economy is in both short run and long run equilibrium. Now, Suppose the price of oil (an input in the production of many goods) decreases. Can you please Show how this will affect the model starting from (1) above. What happens to GDP, The Price Level, and Potential Output? Is the economy in a recessionary gap or an inflationary gap? Also, Suppose that consumers...
Suppose an economy is hit by a recession and people's income fall. a)Show graphically using AD-AS...
Suppose an economy is hit by a recession and people's income fall. a)Show graphically using AD-AS model how the price level and output are affected in the long-run. b)Can the government use fiscal policy to offset the effects on price level and output,explain?
1. Holding everything else constant, the multiplier effect of a $100 tax cut : a)is the...
1. Holding everything else constant, the multiplier effect of a $100 tax cut : a)is the same as the multiplier effect of a $100 increase in G. b)is smaller than the multiplier effect of a $100 increase in G. c)is larger than the multiplier effect of a $100 increase in G. d)may be smaller than, larger than, or equal to the multiplier effect of a $100 increase in G. 2. When the government borrows funds in financial markets to pay...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT