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Please answer these macro multiple choices

Which of the following is a defining characteristic of the AD/AS macro model in the short run? O A. firms cannot operate near

Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point U. The price lev

Consider the AD/AS model. An increase in government purchases will have no impact on equilibrium real GDP if O A. the simple

The economy of Ashenvale is currently in a long-run equilibrium, depicted by point Eg on the graph. Economy of Ashenvale Supp

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Answer #1

Answer : 1) The answer is option E.

The characteristic of short-run AD/AS model is that it is assumed that factor prices are constant in short-run. Because generally in short-run the factor prices do not change. Hence the production cost in short-run do not change. Therefore, option E is correct.

2) The answer is option D.

When price level fall from P0 to P2 then consumer purchase more quantities of goods and services. As a result, the aggregate expenditure increase. When aggregate expenditure increase then AE curve shifts to upward direction and becomes AE2 from AE0. As a result, the new equilibrium point is W. Due to decrease in price level the economy reach at point E from point D. Therefore, option D is correct.

3) The answer is option B.

Government purchases is an element of AD curve. So, if government purchase increase then the AD curve shift to rightward. But it do not effect the equilibrium real GDP if AS curve is vertical. Therefore, option B is correct.

4) The answer is option B.

Here AD shock is positive. This means that aggregate demand increases. Net export is an element of aggregate demand. If net export increase then the AD shock become positive. Net export = Export - Import. Now if import decrease then obviously net export will increase. As a result, the aggregate demand will increase which will shift the AD curve to rightward. So, here based on given options if import level decrease then AD shock is positive and AD curve become AD1. Therefore, option B is correct.

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