None Suppose that the economy is initially in a long-run equilibrium asshown in the graph to the right and then unexpectedly experiencesa large increase in oil prices.1.) Using the line drawing tool, draw the new location of the curvethat initially shifts in response to this event. Be sure to accuratelylabel this curve.2.) Using the point drawing tool, identify the new short-runequilibrium point and label it as 'B'.3.) Using the point drawing tool, identify the new long-runequilibrium point and label it as 'C'.Carefully follow the instructions above and only draw the requiredobjects.Price LevelAP1toLRAS₁ADReal GDPSRAS₁

Exogenous shocks such as a fall in the oil prices will shift the aggregate supply curve SRAS…

Answered: Suppose that the economy is initially…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following actual and forecast demandlevels for Big Mac hamburgers at a local McDonald’s restaurant:DAY ACTUAL DEMAND FORECAST DEMANDMonday 88 88Tuesday 72 88Wednesday 68 84Thursday 48 80FridayThe forecast for Monday was derived by observing Monday’sdemand level and setting Monday’s forecast level equal to this demand level. Subsequent forecasts were derived by using expo-nential smoothing with a smoothing constant of 0.25. Using this exponential smoothing method, what is the forecast for Big Macdemand for Friday?
What are the factors other than price that can shift aggregate demand curve interms of investment and consumption? Also explain graphically.
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
Explain the relationship that economic variables can have with businesscycles. These have both direction and timing. Give an example economicvariable of each combination of direction timing. Of these two attributes, ifyou had exclusive access to a reliable variable, which relationships wouldyou want this variable to have for forecasting purposes
Determine the effect on aggregate demand/ Short Run Agrregate supply of each of the followingevents. Explain whether it represents a movement along the aggregate demand/ Short run Aggregatesupply curve (up or down) or a shift of the curve (leftward or rightward).a) News of a worse-than-expected job market next yearb) A rise in the consumer price index (CPI) leads producers to increase output.c) A rise in legally mandated retirement benefits paid to workers leads producers to reduceoutput.d) As a result of an increase in the value of the dollar in relation to other currencies, Americanproducers now pay less in dollar terms for foreign steel, a major commodity used in production.e) An increase in the quantity of money by the Federal Reserve increases the quantity of moneythat people wish to lend, lowering interest rates.f) Greater union activity leads to higher nominal wages.g) A fall in the aggregate price level increases the purchasing power of households’ and firms’money holdings. As…
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on: aggregate demand, aggregate supply, price level, real GDP.(a) A decrease in government expenditure in infrastructure(b) A severe recession occurs in a country which has been a major importer of thenation’s exports.(c) The federal government increases business taxes with diagram
Question Completion Status: ↳ A Moving to another question will save this response. Question 29 If the government decided to go to war on Russia, how would that impact the aggregate model? O a. This would not impact the aggregate model at all. O b. This would increase the price level which would shift the aggregate demand curve downwards. O c. It might shift the aggregate demand curve upward or to the right, and maybe shift the LRAS to the left. O d. It would shift the LRAS to the right. A Moving to another question will save this response. 1 2 # 3 4
Assume an economy operates in the intermediate range of its aggregate supplycurve. For each of the following changes in conditions, state the direction of theeffect on:1. aggregate demand, 2. aggregate supply, 3. price level, and 4. real GDP. (a) An increase in government expenditure in infrastructureClick or tap here to enter text.(b) A severe recession occurs in a country, which has been a major importer of thenation’s exports.Click or tap here to enter text.(c) The federal government increases business taxesClick or tap here to enter text.(d) The Central Bank increases the cash interest rate
For each of the three theories for the upward slopeof the short-run aggregate.supply curve, carefullyexplain the following:aA how the econom}' recovers from a recession andreturns to its long-run equilibrium without anypolicy interventionb. what determines the speed of that recovery
2. If both G and T increase by the same amount, what impact will this have on the S curve? Just state by choosing out of the following options: Shift outwards, shift inwards, no change in S.
Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Also in year 2, the cost of lumber used to build homes increases. Which of the following is most likely to be the equilibrium change? Price S 8 E C D 0 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The equilibrium will be at point C before the change in expectations and point B after the change b The equilibrium will be at point A before the change in expectations and point B after the change с The equilibrium will be at point A before the change in expectations and point E after the change d The equilibrium will be at point E before the change in expectations and point C after the change la Quantity
This is a symptom of a recession: O Real salary increases O Promotions occur and bonuses increase Promotions and bonuses are postponed Increased demand for capital goods

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