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See below. These are true or false questions.
1). In the long-run,
2). One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption.
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- In the long-run, aggregate supply is a horizontal line at the long-run price level people can afford. True False One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption. True FalseSuppose our economy is in macroeconomic equilibrium (also called "general equilibrium") with an upward-sloping aggregate supply curve and a downward-sloping aggregate demand curve. An increase in aggregate demand will: Question 5 options: a) Increase aggregate supply. b) Decrease the price level. c) Causes the aggregate supply to shift to the right. d) Increase real GDP. e) Reduce the number of discouraged workers in the unemployment rate."The demand curves for all products have negative slopes. For instance, the demand curves for milk,automobiles, personal computers, and shirts all have negative slopes. Therefore, because the aggregate demand curve shows the demand for all products, it too must have a negative slope. " Comment on this assertion.
- The following graph plots aggregate demand (AD2027AD2027) and aggregate supply (AS) for the imaginary country of Cotopaxi in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will be given by the curve labeled ADAADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate demand in 2028 will be given by the curve labeled ADBADB, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 2027 and 2028, depending on whether the economy moves from the initial price level of 102 to the…7) Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve? A) They will move the economy up along a stationary aggregate demand curve. B) They will move the economy down along a stationary aggregate demand curve. C) They will shift the aggregate demand curve to the right. D) They will shift the aggregate demand curve to the left.Describe the change in aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (In your answer, indicate whether the change will "Decrease" or "Increase" aggregate supply or have no effect.) (a) A rise in the average price of inputs; (b) An increase in worker productivity; (c) Government antipollution regulations become stricter; (d) A new subsidy program is enacted for new business investment in productive equipment; (e) Energy prices decline.
- 1) Define aggregate demand and aggregate supply. 2) Give three reasons why the aggregate demand curve slopes downward. 3) Give three reasons why the aggregate supply curve slopes upwards.5) Which of the following is TRUE about the long-run aggregate supply curve? A) It is vertical at the level of potential GDP. B) It shows the relationship between the price level and real GDP when the economy is at full employment. C) It does not shift in response to temporary changes in aggregate demand. D) All of the above are true. 6) Suppose the consumption function is given by the equation C= 100 +0.8YD, where YD is disposable income. What is the marginal propensity to save? A) 0.8 C) 100 B) 0.2 D) 2.0 7) Which of the following shifts the aggregate demand curve rightward? A) a tax cut B) a decrease in the quantity of money and an increase in interest rates C) a decrease in government expenditure D) expectations that future incomes will fallUse the following graph to answer the following questions. Line Y Price level (P) 100 80 B Line Z Line X2 Line X1 Real GDP (3) If point A occurs chronologically before point B, then this graph could represent a decrease in aggregate demand with a decrease in long-run and short-run aggregate supply. a decrease in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in long-run aggregate supply. an increase in aggregate demand with constant long-run and short-run aggregate supply. constant aggregate demand with a decline in short-run aggregate supply.
- Which of the following statements best describes the aggregate supply curve? A) The aggregate supply curve represents the relationship between the price level and the total output or real GDP in the macroeconomy. B) The aggregate supply curve represents the relationship between the inflation rate and the total output or real GDP in the macroeconomy. C) The aggregate supply curve represents the relationship between the inflation rate and the total demand or real GDP in the macroeconomy. D) The aggregate supply curve represents the relationship between the price level and the potential output or GDP in the macroeconomy.Assume the aggregate demand for a good follows the law of demand (@gª < 0). Suppose the equilibrium in the market for др the good moves from Point A to Point B. Which statement below must be true? Р A Q A. B. C. Demand decreased and supply decreased Demand increased and supply decreased Demand decreased and supply increased D. Demand increased and supply increased E. Demand increased but we don't know if supply shifted F. Demand decreased but we don't know if supply shiftedThe graphs illustrate an initial equilibrium for the economy. Suppose that the government increases spending. Use the graphs to show the new positions of aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS) in both the short run and the long run, as well as the short‑run and long‑run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Adjust the graph. explain the second image as well and which is right.