ZuoTi.Pro
Question

1. The diagram below shows an AD/AS model for a hypothetical economy. The economy begins in long-run equilibrium at point A.
C. Describe a plausible economic event (ie. Shock) that could have shifted the AD curve from AD1 to AD2? D. Please describe t
business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

A - The events such as the decrease in the demand for the goods and services by the consumers , the decrease in the spending of the government , the increase in the taxes will affect the AD in a negative sense and will give a negative shock to the economy . In this condition , the deflationary gap is faced in the economy .

B - There can be the application of the monetary and fiscal policies in the economy by the fed and the government. The decrease in the taxes , the increase in the government spending , the increase in the supply of money by the fed mometary policies will again bring back the AD to the original position.

0 0
Add a comment
Know the answer?
Add Answer to:
1. The diagram below shows an AD/AS model for a hypothetical economy. The economy begins in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Refer to the diagram that shows an ADIAS model fora hypothetical economy The economy begins in...

    Refer to the diagram that shows an ADIAS model fora hypothetical economy The economy begins in long-run equilibrium at point A AS1 Following the positive AS shock shown in the diagram, the adjustment process will take the economy to a long-run equilibrium where the price level is AS2 and real GDP is O A. 100; 750 B. 70; 500 O C. 50; 850 O D. 50; 950 O E. 70; 750 100 . 70 50 AD 500 750 850 Real...

  • Figure: AD–AS Refer to Figure: AD–AS. Assume that the economy is in long-run equilibrium. If the...

    Figure: AD–AS Refer to Figure: AD–AS. Assume that the economy is in long-run equilibrium. If the Federal Reserve were to lower the targeted federal funds rate we would most likely expect: there will be a downward movement along the aggregate demand curve AD1. the aggregate demand curve will stay unchanged at AD1. the aggregate demand curve will shift to AD3. the aggregate demand curve will shift to AD2. LRAS Aggregate price level SRAS AD, AD AD, Y₂ YpY, Real GDP

  • Consider an economy that begins with real GDP equal to potential GDP. There is then a...

    Consider an economy that begins with real GDP equal to potential GDP. There is then a sudden increase in the prices of raw materials, which shifts the aggregate supply (AS)curve upward. a. Draw the initial long run equilibrium in an AD/AS diagram. b. Now show the immediate effect of the supply shock in your diagram. c. Suppose wages and prices in this economy adjust instantly to shocks. Explain what happens to unemployment in this economy. d. If wages and prices...

  • LRAS In the graph to the right illustrating the AD-AS model, assume the economy was in...

    LRAS In the graph to the right illustrating the AD-AS model, assume the economy was in equilibrium at point E1. Then, assume there was a decline in spending on new houses. Where does short-run equilibrium occur? Where does long-run equilibrium occur? 1.) Using the point drawing tool, plot the point that represents short-run equilibrium. Label this point E2. Price level, P. SRAS a SRAS2E1 2.) Using the point drawing tool, plot the point that represents long-run equilibrium. Label this point...

  • The diagram below shows an ADIAS model for a hypothetical economy which is initially in a...

    The diagram below shows an ADIAS model for a hypothetical economy which is initially in a short-run equilibrium at point A Y AS 120 B Price Level A 90 D 70 AD OOO A. decreasing government transfer payments. B. decreasing the net tax rate. C. implementing an expansionary fiscal policy. O D. increasing government purchases. 40 of 40 (32 complete) 120 90 D 70 E AD 400 600 700 750 Real GDP FIGURE 24-7 Refer to Figure 24-7. The government...

  • The following table shows the initial level of aggregate demand (AD) and te supply (AS) for the economy of Adanac.

    The following table shows the initial level of aggregate demand (AD) and te supply (AS) for the economy of Adanac. The full-employment level of output is $500 billion.  a. Draw the corresponding initial aggregate demand and aggregate supply curve (AD0 and AS0). b. What is the initial equilibrium price level and level of real GDP?  c. At this initial equilibrium (AD0 and AS0), is Adanac experiencing either a recessionary or inflationary gap? If so, how large a gap exists? d. Suppose the aggregate demand in...

  • AS/AD: Assume the economy is currently at potential output. Then, a major increase in stock prices...

    AS/AD: Assume the economy is currently at potential output. Then, a major increase in stock prices makes consumers feel wealthier, leading them to increase their consumption spending. a) What does it mean for the economy to be at “potential output”? What determines the potential output? b) Use the Aggregate Supply and Demand model to analyze the short-run impact that this new policy will have on real GDP and the price level. This is the “Shock.” c) Assuming no other changes...

  • The economy of Neverland has the following AD and AS schedules. Denote Yad as the level...

    The economy of Neverland has the following AD and AS schedules. Denote Yad as the level of real GDP along the AD curve; let Yas be the level of real GDP along the AS curve. GDP is shown in billions of 2002 dollars. (10 marks) Price Level 90 100 110 120 130 140 YAD 1100 1000 900 800 700 600 YAS 750 825 900 975 1050 1125 a. Plot the AD and AS curves on a scale diagram. b. What...

  • The figure below depicts the aggregate demand curve (AD) and the long-run aggregate supply curve (LRAS) for the United States. The economy is initially at long-run equilibrium, at point A.

    The figure below depicts the aggregate demand curve (AD) and the long-run aggregate supply curve (LRAS) for the United States. The economy is initially at long-run equilibrium, at point A.One of the most contentious issues among economists involves the economy’s adjustment to long-run equilibrium. Some economists believe that adjustment can and should occur naturally. This group, the classical economists, stresses the importance of aggregate supply. Others see the return to long-run equilibrium as an adjustment that occurs unpredictably and often...

  • 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

    9. Economic fluctuations II 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. Initially, the expected price level is equal to the actual price level, and the economy is in long-run equilibrium at its natural level of output, $120 billion. Suppose a bout of severe weather drives up agricultural costs, increases the costs of transporting goods and services, and increases the costs of producing goods...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT