Homework Answers
ANSWER-1)
The price increases in the short run due to a shortage of supply. Thus allows firms to earn to widen profit margins and signal producers to increase output. Since existing firms may increase the production and new firms may also enter the industry in the long run; thus as result supply shortage will disappear and consequently the prices will fall. As a result even costs, which initially remain unchanged, will start creeping upward and output will again decline to its long-run level.
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Chapter 13 1. Why might rising prices stimulate short-run production but have no effect on long-run...
Suppose the consumption function is C = $400 billion + 0.8Y and the government wants to stimulate the economy
Suppose the consumption function is C = $400 billion + 0.8Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) witha) A $50 billion increase in government purchases?$ billionb) A $50 billion tax cut?$ billionc) A $50 billion increase in income transfers?$ billionWhat will the cumulative AD shift be ford) The increased G?$ billione) The tax cut?$ billionf) The increased transfers?$ billion
The table gives the aggregate demand schedule, the short run aggregate supply schedule, and the long run aggregat...
The table gives the aggregate demand schedule, the short run aggregate supply schedule, and the long run aggregate supply schedule for an economy What is the quantity of real GDP at the short-run macroeconomic equilibrium? Price level (GDP deflator) The quantity of real GDP at the short-run macroeconomic equilibrium is s billion 100 Real GDP Real GDP Real GDP supplied supplied demanded in short run in long run (billions of 2007 dollars) 200 500 350 500 500 500 400 650...
The following graph shows the short-run aggregate supply curve (AS), the aggregate demand curve (AD), and the long-run aggregate supply curve (LRAS) for a hypothetical economy
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15. The short-run aggregate supply curve will shift to the: right if commodity prices i...
15.
The short-run aggregate supply curve will shift to the:
right if commodity prices increase.
left if productivity increases.
left if nominal wages increase.
right if government spending increases.
35.
An expansionary fiscal policy either _____ government spending
or _____ taxes.
decreases; increases
decreases; decreases
increases; decreases
increases; increases
12.
The short run in macroeconomic analysis is a period:
in which many production costs can be taken as fixed.
in which interest rates are fixed.
of two months, and the...
Using aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves
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In the short run the classical production function is concave. What property best explains why? a...
In the short run the classical production function is concave. What property best explains why? a diminishing marginal returns b the classical dichotomy c crowding out d constant returns to scale 2. Which of the following will shift the aggregate demand curve in the classical model? a an increase in investor bearishness b an increase in government spending c a decrease in taxes d an increase in the money supply 3. Laissez-fair doctrine is interpreted as? a government management is...
The graph shows the economy in long-run equilibrium Then the world economy expands and the demand...
The graph shows the economy in long-run equilibrium Then the world economy expands and the demand for U.S.-produced goods increases Price level (GDP deflator, 2009-100) 14 Draw a curve that shows 1) the effect of increased demand for U.S.-produced goods. Label it 1 2) the effect of a rising money wage rate that returns the economy to full employment. Label it 2. Draw a point at the new long-run equilibrium 13 SAS 12 An economy is in a long-run equilibrium....
6. Why the aggregate supply curve slopes upward in the short run In the short run,...
6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. Consider a soybean farmer who expects a...
32. The rational expectations hypotheses implies that discretionary macroeconomic policy is: a. relatively effective in both...
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Closed Economy In the Short Run. I have solved (a) but confused on how to solve...
Closed Economy In the Short
Run. I have solved (a) but confused on how to solve the rest.
I-MPC sider the following model of a closed economy in the short run Total demand is given by the accounting identity I MPC Y =C+I+G The consumption function is C = ao + a (Y +TT - TT) - MPC The tax schedule is Tx = To + TY Transfers are given by Th = Tro – hY Investment demand is I=bo-bzi...
The table gives the aggregate demand schedule, the short run aggregate supply schedule, and the long run aggregate supply schedule for an economy What is the quantity of real GDP at the short-run macroeconomic equilibrium? Price level (GDP deflator) The quantity of real GDP at the short-run macroeconomic equilibrium is s billion 100 Real GDP Real GDP Real GDP supplied supplied demanded in short run in long run (billions of 2007 dollars) 200 500 350 500 500 500 400 650...
15.
The short-run aggregate supply curve will shift to the:
right if commodity prices increase.
left if productivity increases.
left if nominal wages increase.
right if government spending increases.
35.
An expansionary fiscal policy either _____ government spending
or _____ taxes.
decreases; increases
decreases; decreases
increases; decreases
increases; increases
12.
The short run in macroeconomic analysis is a period:
in which many production costs can be taken as fixed.
in which interest rates are fixed.
of two months, and the...
The graph shows the economy in long-run equilibrium Then the world economy expands and the demand for U.S.-produced goods increases Price level (GDP deflator, 2009-100) 14 Draw a curve that shows 1) the effect of increased demand for U.S.-produced goods. Label it 1 2) the effect of a rising money wage rate that returns the economy to full employment. Label it 2. Draw a point at the new long-run equilibrium 13 SAS 12 An economy is in a long-run equilibrium....
Closed Economy In the Short
Run. I have solved (a) but confused on how to solve the rest.
I-MPC sider the following model of a closed economy in the short run Total demand is given by the accounting identity I MPC Y =C+I+G The consumption function is C = ao + a (Y +TT - TT) - MPC The tax schedule is Tx = To + TY Transfers are given by Th = Tro – hY Investment demand is I=bo-bzi...
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