Homework Answers
Cost push inflation is the result of decrease in aggregate supply due to increase in cost of production. Increase in price or resources, factors of production, increase in price of oil or any other factor that increases cost of production leads to decrease in aggregate supply.
This shifts the AS curve leftward to AS'. New short run equilibrium reaches at e' where equilibrium price is higher at P' and equilibrium real GDP decreases to Y'.
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“Cost-push inflation is usually referred to as supply side inflation.” Using aggregate demand and aggregate supply...
Define demand-pull inflation. Using the AS/AD model, explain how demand-pull inflation affects the level of aggregate...
Define demand-pull inflation. Using the AS/AD model, explain how demand-pull inflation affects the level of aggregate output and the price level in the economy (which curve shifts, in what direction, and what happens to equilibrium output and price level). Give an example of macroeconomic policy that can be used to counter the effects of demand-pull inflation and discuss its effect on the equilibrium output and price level.
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a...
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a standard IS-LM-FE framework while the short-run aggregate supply side is characterized by (SRAS) aggregate output/income, Y is the full employment output level, P is the Here Y is realized aggregate realized price level, Pe is the expected price level and b is a constant that depends on the slope of the labour demand curve. Explain the effects of each of the following on the...
a. The spending-income multiplier reduces spending-income changes Into larger changes in aggregate supply, causing cost-push Inflation....
a. The spending-income multiplier reduces spending-income changes Into larger changes in aggregate supply, causing cost-push Inflation. magnifies spending-income changes into greater changes in aggregate demand, causing demand-pull inflation. reduces spending-income changes Into smaller changes in aggregate supply, causing demand-push Inflation Omagnifies spending-income changes into smaller changes in aggregate demand, causing demand-pull inflation. b. AccordIng to malnstream economists, the usual cause of macroeconomic Instablity Is the natlonal debt aggregate spending and its components. International trade disruptions aggregate production and Its components....
Question 21 1 pts Use the following table which shows the aggregate demand and aggregate supply...
Question 21 1 pts Use the following table which shows the aggregate demand and aggregate supply schedule for a hypothetical economy to answer the next question. Real Domestic Output Demanded Price Level Real Domestic Output Supplied (in billions) (index value) (in billions) $3,000 350 $9,000 4,000 300 8,000 5,000 250 7,000 6,000 200 6,000 7,000 150 5,000 8,000 100 4,000 At the price level of 150, there will be a general surplus in the economy, and output supplied will decrease...
Question 1 (Inflation and the Macroeconomy) Distinguish between demand-pull inflation and cos (aggregate demand/aggregate supply) model...
Question 1 (Inflation and the Macroeconomy) Distinguish between demand-pull inflation and cos (aggregate demand/aggregate supply) model to illustrate the theoretical effects of these two types of inflation on the price level (P), employment (L) and economic growth (real GDP) the short run. Now identify the various factors that have contributed towards demand-pul inflation and cost-push inflation in South Africa and critically analyse whether they are consistent with the predictions of the AD-AS model. (20 marks) Question 2 (Global Developments) Use...
Using the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS)...
Using the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves, briefly explain how an open market purchase will affect the equilibrium price level (P) and real output (Y) in the short run. Assume the economy is initially in a recession?
1. An introduction to the AD-AS model The AD-AS (aggregate demand and aggregate supply) model is...
1. An introduction to the AD-AS model The AD-AS (aggregate demand and aggregate supply) model is a useful simplification of the macroeconomy. The horizontal axis of a diagram of the AD and AS curves measures which of the following? The price of one particular representative good produced in the economy The amount of one particular representative good produced in the economy An economy's price level An economy's aggregate output The vertical axis of a diagram of the AD and AS...
-refully Using aggregate supply and aggregate demand curves, illustrate and summarize what impact each of the...
-refully Using aggregate supply and aggregate demand curves, illustrate and summarize what impact each of the would have on the price level and the equilibrium level of aggregate output in the short run. During a period of increasing aggregate demand, an economy experiences large gains in productivity.
Suppose that the aggregate demand and supply schedules for a hypothetical economy are as shown below:
1. Suppose that the aggregate demand and supply schedules for a hypothetical economy are as shown below: a. Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output? Explain. b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250? c. Suppose...
Explain the effects of a wealth tax using the Aggregate Demand and Aggregate Supply Model? How...
Explain the effects of a wealth tax using the Aggregate Demand and Aggregate Supply Model? How will the Price Level, Real GDP, and Employment be impacted in the short-run if this first most important policy decision was put into practice? How might the Price Level, Real GDP, and Employment be impacted in the long-run if this first most important policy decision was put into practice? Be detailed, specific, and clear.
Define demand-pull inflation. Using the AS/AD model, explain how demand-pull inflation affects the level of aggregate output and the price level in the economy (which curve shifts, in what direction, and what happens to equilibrium output and price level). Give an example of macroeconomic policy that can be used to counter the effects of demand-pull inflation and discuss its effect on the equilibrium output and price level.
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a standard IS-LM-FE framework while the short-run aggregate supply side is characterized by (SRAS) aggregate output/income, Y is the full employment output level, P is the Here Y is realized aggregate realized price level, Pe is the expected price level and b is a constant that depends on the slope of the labour demand curve. Explain the effects of each of the following on the...
a. The spending-income multiplier reduces spending-income changes Into larger changes in aggregate supply, causing cost-push Inflation. magnifies spending-income changes into greater changes in aggregate demand, causing demand-pull inflation. reduces spending-income changes Into smaller changes in aggregate supply, causing demand-push Inflation Omagnifies spending-income changes into smaller changes in aggregate demand, causing demand-pull inflation. b. AccordIng to malnstream economists, the usual cause of macroeconomic Instablity Is the natlonal debt aggregate spending and its components. International trade disruptions aggregate production and Its components....
Question 21 1 pts Use the following table which shows the aggregate demand and aggregate supply schedule for a hypothetical economy to answer the next question. Real Domestic Output Demanded Price Level Real Domestic Output Supplied (in billions) (index value) (in billions) $3,000 350 $9,000 4,000 300 8,000 5,000 250 7,000 6,000 200 6,000 7,000 150 5,000 8,000 100 4,000 At the price level of 150, there will be a general surplus in the economy, and output supplied will decrease...
Question 1 (Inflation and the Macroeconomy) Distinguish between demand-pull inflation and cos (aggregate demand/aggregate supply) model to illustrate the theoretical effects of these two types of inflation on the price level (P), employment (L) and economic growth (real GDP) the short run. Now identify the various factors that have contributed towards demand-pul inflation and cost-push inflation in South Africa and critically analyse whether they are consistent with the predictions of the AD-AS model. (20 marks) Question 2 (Global Developments) Use...
-refully Using aggregate supply and aggregate demand curves, illustrate and summarize what impact each of the would have on the price level and the equilibrium level of aggregate output in the short run. During a period of increasing aggregate demand, an economy experiences large gains in productivity.
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