Question

level (GOP door. 2009100) The following events have occurred at times in the history of the United States: 1. The world economy goes into an expansion 2. US, businesses expect future profits to rise. 3. The government increases its expenditure on goods and services in a time of war or increased international tension Explain the combined effects of these events on U.S.real GDP and the price level, starting from a position of long-run equilibrium The combined effect of these events are in real GDP and in the price level O A an increase a fall C no change a rise an increase no change an increase arise o went increases The graph shows an economy in long-run equilibrium The world economy goes into an expansion, U.S. businesses expect future profits to rise, and the govern s expenditure on goods and services in a time of war or increased international tension Draw one new curve that shows the combined effect of the three events. Label Draw a point at the new short-run macroeconomic equilibrium 179 180 180 Real GDP (ilions of 2009 dollars) >>> Draw only the object specified in the question

Answer 1

The aggregate demand is the total volume of purchases made by consumers, investors, government and foreign nationals. An economic expansion in the rest of the world creates more export from the country and the level of aggregate demand increase and real GDP and price level increase. If the business confidence is high regarding the future profit, the businessmen will invest more. The aggregate demand will increase and the real GDP and price level also increase. An increase in government expenditure stimulates more demand and real GDP and price level increases. Answer: The combined effect of these events is an increase in real GDP and a rise in price level. D. an increase, a rise. | Price level(GDP deflator 2009=100) 140 LAS 1301 120 AS EI 110H 100 ADI ND 80H 16.0 17.0 18.0 19.0 20.0 Real GDP (trillions of 2009 dollars) The combined effect of these events is rise in price level and increase in real GDP. The aggregate demand curve shift to right from AD to AD1. The economy moves to a new equilibrium from E to El.