1.)Suppose a removal of a government regulation on the safety of goods produced in the US cause foreigners to become less confident about products made in America; illustrate the effect of this on the American economy by shifting the aggregate demand (AD) curve in the appropriate direction.
Homework Answers
1.
Aggregate demand (AD) is the aggregate of consumption (C), investment (I), government spending (G), and net export (Nx) (= export – import).
AD = C + I + G + Nx
Since foreigners are less confident, it hampers Nx – export should decrease.
The AD curve should shift inward (left side) as AD1, making the real GDP down.
2.
In this case, there is favorable condition of consumption. It increases C, which turns into shifting of AD outward (right side) as AD1.
It makes real GDP up.
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1.)Suppose a removal of a government regulation on the safety of
goods produced in the US...
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sell bonds
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reduce the discount rate
3.
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government data security and has decided to spend
$1billion
dollars on improving data security. Government will not cut
spending in other areas of the budget, so it will likely have to
issue new government bonds to finance this increase in government
spending. Use the graph below to show the impact of the
aforementioned on the economy by shifting the appropriate
curve(s).
2.)
Suppose the US government has decided to expand its budget...
An increase in cotton prices, a key input in many industries,
have influenced the macroeconomy of a country. Illustrate the
effect of the price increase of cotton by shifting the aggregate
supply curve in the appropriate direction.
Price Level Aggregate Supply Aggregate Demand Real GDP
1. Inflationary pressure in the AS-AD model can be shown as
a
a) supply shock that shifts the AD to the left.
b) rise in input prices affecting most firms across the economy
shifting AS curve to the right.
c) rise in input prices affecting most firms across the economy
shifting AS curve to the left.
2. Which of the following would cause a positive demand shock
(shift to the right) in aggregate demand?
a) decreased availability of capital stock....
1.
2.
If the Fed wants to reduce the money supply through open
market operations, it will
Select the correct answer below :
sell bonds
buy bonds
Oreduce the required reserves ratio
reduce the discount rate
3.
A growing debt/GDP ratio could mean that, all else the
same,
Select the correct answer below:
the government is running large budget deficits
the government is paying down the debt
government expenditures are less than tax revenues.
the economy is in a growth...
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