Homework Answers
Answer is B.
Classical don't believe in government role and they thinks that full employment is a natural phenomenon or full employment will occur automatically, there is no need to interfere.
So decrease in wages will increase the demand for labour and production will increase and economy will get restored to full employment.
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3.18 A massive decrease in aggregate demand plunges the U.S. economy into a recession and unemployment...
We examined the (classical) aggregate supply/aggregate demand model. Explain in your own words how the economy would...
We examined the (classical) aggregate supply/aggregate demand model. Explain in your own words how the economy would adjust to LR equilibrium automatically from being in a recession.
QUESTION 12 Which of the following statements about the classical model of the economy is FALSE?...
QUESTION 12 Which of the following statements about the classical model of the economy is FALSE? O Wages and prices are flexible. The economy will always move toward, or be at, full employment. O Savings and investment will always be equal. Individuals pursue the public interest, not their own self-interest. 0.5 points QUESTION 13 Economic growth will NOT result in deflation if aggregate demand shifts inward to the left as aggregate supply shifts outward to the right inward to the...
IV. Suppose an economy is in long run equilibrium. (a) Use the model of aggregate demand...
IV. Suppose an economy is in long run equilibrium. (a) Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium on a BIG and clearly labeled graph. Label the equilibrium point A. Be sure to include the short-run and long-run aggregate supply. (b) Household spending increases. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (label it point B) (c)...
The figure below depicts the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), 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), the short-run aggregate supply curve (SRAS), 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, stress the importance of aggregate supply. Others see the return to long-run equilibrium as an...
The graph below depicts an economy where a decline in aggregate demand has caused a recession
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by changing taxes to reduce the burden of this recession.Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? b. If the MPC...
The graph below depicts an economy where a decline in aggregate demandes caused a recession. This...
The graph below depicts an economy where a decline in aggregate demandes caused a recession. This economy current level of real GDP (Y) is below its long-run equilibrium, which is illustrated by the long run aggregate supply curve LRASL and price level P. below the equilibrium value of Without any fiscal policy, we expect the economy to eventually return to full employment on its own. Use the graph below to the Instructions: Use the tool provided to plot New Curve...
The graph below depicts an economy where a decline in aggregate demand has caused a recession....
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy LRAS Price Level 100 200 300 400 500 600 700 800 900 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to increase to restore the economy to its long-run equilibrium? O...
(6) Imagine that the economy is in a recession. Which one of the following tactics is...
(6) Imagine that the economy is in a recession. Which one of the following tactics is a way to increase output by shifting aggregate demand outward? Raising taxes to increase the government surplus Increasing government spending Increasing the required reserve ratio Imposing tariffs on foreign goods (7) In the short run, supply shocks cause prices to __________ and the quantity demanded to __________. increase; increase increase; decrease decrease; increase decrease; decrease (8) Good deflation...
When the aggregate demand curve and the short-run aggregate supply curve intersect, a) the long-run aggregate...
When the aggregate demand curve and the short-run aggregate supply curve intersect, a) the long-run aggregate supply curve must also intersect at the same point. Ob) the economy must experience higher output than the natural level of output. o c) the economy must experience lower output than the natural level of output. o d) the economy is in short-run macroeconomic equilibrium. In a small economy in 2016, aggregate expenditure was $900 million while GDP that year was $750 million. Which...
The graph below depicts an economy where a decline in aggregate demand has caused a recession....
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy LRAS Price Level 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?...
QUESTION 12 Which of the following statements about the classical model of the economy is FALSE? O Wages and prices are flexible. The economy will always move toward, or be at, full employment. O Savings and investment will always be equal. Individuals pursue the public interest, not their own self-interest. 0.5 points QUESTION 13 Economic growth will NOT result in deflation if aggregate demand shifts inward to the left as aggregate supply shifts outward to the right inward to the...
IV. Suppose an economy is in long run equilibrium. (a) Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium on a BIG and clearly labeled graph. Label the equilibrium point A. Be sure to include the short-run and long-run aggregate supply. (b) Household spending increases. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (label it point B) (c)...
The graph below depicts an economy where a decline in aggregate demandes caused a recession. This economy current level of real GDP (Y) is below its long-run equilibrium, which is illustrated by the long run aggregate supply curve LRASL and price level P. below the equilibrium value of Without any fiscal policy, we expect the economy to eventually return to full employment on its own. Use the graph below to the Instructions: Use the tool provided to plot New Curve...
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy LRAS Price Level 100 200 300 400 500 600 700 800 900 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to increase to restore the economy to its long-run equilibrium? O...
When the aggregate demand curve and the short-run aggregate supply curve intersect, a) the long-run aggregate supply curve must also intersect at the same point. Ob) the economy must experience higher output than the natural level of output. o c) the economy must experience lower output than the natural level of output. o d) the economy is in short-run macroeconomic equilibrium. In a small economy in 2016, aggregate expenditure was $900 million while GDP that year was $750 million. Which...
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy LRAS Price Level 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?...
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