Question

20. Describe and show what happens to aggregate equilibrium when SAS changes (both increase and decrease;...

20. Describe and show what happens to aggregate equilibrium when SAS changes (both increase and decrease; be sure to give at least one reason for the shift).

21. Describe and show long run aggregate equilibrium. Identify a recessionary gap and an inflationary gap and reasons why the economy is in them. Describe and show how each gap is eliminated on both the AD side and the SAS side. .

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Aggregate equilibrium is determined when AD and AS curve intersect each other at a particular point.

If short run aggregate supply (SAS) changes, it can impact price level and output in the economy.

If there is an increase in short-run aggregate supply, AS curve will shift rightwards. This will increase the output but will decrease the price in an economy. Increase in short-run aggregate supply can be due to rise in subsdies or fall in tax rates.

If there is an decrease in short-run aggregate supply, AS curve will shift leftwards. This will increase the price but will decrease the output in an economy. Decrease in short-run aggregate supply can be due to rise in inputs and cost of production or increase in the tax rates.

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
Describe whether the following changes cause the aggregate demand curve to increase (shift right), decrease (shift...
Describe whether the following changes cause the aggregate demand curve to increase (shift right), decrease (shift left), or neither. (a) The price level increases. (b) Investment decreases. (c) Imports decrease and exports increase. (d) The price level decreases. (e) Consumption increases. (f) Government purchases decrease. Describe whether the following changes cause the long-run aggregate supply curve to increase (shift right), decrease (shift left), or neither. (a) The price level increases. (b) The stock of capital in the economy increases. (c)...
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...
2018- 2019 Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that...
2018- 2019 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. You should draw your own AD/AS graph which you can then scan and paste into your post. Your graph needs to be clearly labeled and explained carefully. Make sure that your graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply...
Assume that the US economy is in equilibrium. Now assume that C & Ig decrease because...
Assume that the US economy is in equilibrium. Now assume that C & Ig decrease because of a drop in consumer and business confidence. Using an AD/AS graph, show the economy in equilibrium and then what happens when confidence drops. Explain the situation the US economy is facing (i.e., a recession) both graphically and in words (hint would you more likely have a deflationary or an inflationary gap in a recession?). Then explain the two options available, both fiscal policy...
Suppose the economy is initially in long-run equilibrium and the government reduces the marginal tax rate....
Suppose the economy is initially in long-run equilibrium and the government reduces the marginal tax rate. a. What will happen to output and inflation if the effects of the tax cuts are stronger on aggregate demand than on potential GDP? show the changes in AD and Y*. Both the AD and Y* (potential output) curves will shift to the left, so output and inflation will decrease. The AD curve will shift to the left more than the Y* (potential output)...
2. Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled...
2. Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate,” you must show how you arrived at your final answer. The economy of Newland is in short-run macroeconomic equilibrium. The current real output is $400 billion, and the full employment output is $500 billion. The marginal propensity to consume is 0.8. (a) Is...
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) Open market purchase will result in: increase in bank reserves and a decrease in the...
1) Open market purchase will result in: increase in bank reserves and a decrease in the federal funds rate. increase in bank reserves and an increase in the federal funds rate. decrease in bank reserves and a decrease in the federal funds rate. decrease in bank reserves and an increase in the federal funds rate. 2) An increase in government expenditure would shift the: A) aggregate demand curve rightward. aggregate demand curve leftward. aggregate supply curve rightward. aggregate supply curve...
Both monetarists and Keynesians would agree that aggregate supply can be treated as vertical: 1 when...
Both monetarists and Keynesians would agree that aggregate supply can be treated as vertical: 1 when aggregate demand shifts to the left 2 when the price level is constant 3 when we are at full employment 4 in the very short run The Austrian school of thought believes that demand management policy should not be used because: 1 shifting AD to the right is likely to cause a falling price level. 2 big government prefers deregulation policies, which shift aggregate...
Question -Organizational change goes beyond promotions and the threat of layoffs. What ways other than those...
Question -Organizational change goes beyond promotions and the threat of layoffs. What ways other than those discussed in the case would you use to entice people to embrace proposed changes? Provide several suggestions and justify their rationale. CASE STUDY- Blue Cross and Blue Shield, and Others: Understanding the Science behind Change Kevin Sparks has been trying to get his staff to change the way it monitors and supports the data center for the past year, but he hasn’t been getting...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT