What is the correct answer
In the dynamic AS/AD model, the economy is in long run equilibrium in year 1, but in year 2, LRAS shifts to the right more than AD, which shifts to the right more than SRAS. Compared to year 1, what will happen to the unemployment rate and the price level in year 2?
They both will fall.
The unemployment rate will rise and the price level will fall.
They both will rise.
The unemployment rate will fall and the price level will rise.
Homework Answers
Answer
Option 3
The LRAS and AD both shifted right but the AD shifted lower than
the LRAS means there is a recessionary gap but the AD and LRAS both
increased so the real GDP and price level both increased but the
situation is a recessionary gap situation so there is an increase
in the unemployment.
they both will rise.
Add Answer to:
what will happen to the unemployment rate and the price level in year 2?
1. Explain what will happen to the price level real GDP and the unemployment rate in...
1. Explain what will happen to the price level real GDP and the unemployment rate in the following cases: a. AD falls by the same amount that SRAS rises b. AD falls by less than SRAS rises c. AD falls by more than SRAS falls d. AD falls by the same amount that SRAS falls e. AD falls by less than SRAS falls 2. Explain how expectations about future sales will affect investment. 3. How will a change in the...
New LRAS, SRAS, and AD lines in the graph for the next year: Price level The...
New LRAS, SRAS, and AD lines in the graph for the next
year:
Price level The following graph shows an economy in long-run macroeconomic equilibrium. All the usual assumptions of the dynamic demand and supply model hold Firms and workers expect there to be a decline in the inflation rate in the coming year LRAS, SRAS Use the line tool to draw three lines 1) the new LRAS, 2) the new SRAS, and 3) the new AD line in the...
The following graph shows the economy in long-run equilibrium atthe expected price level of 120...
The following graph shows the economy in long-run equilibrium at
the expected price level of 120 and the natural level of output of
$600 billion. Suppose a sudden and severe contraction in the
housing market reduces the value of homes and causes consumers to
spend less.Shift the short-run aggregate supply (AS) curve or the aggregate
demand (AD) curve to show the short-run impact of
the housing market slump.In the short run, the decrease in consumption spending
associated with the housing...
1. Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the...
1. Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the long-run aggregate supply, LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). What could be the unemployment rate if the natural rate of unemployment is 4%? 2. Aggregate demand curve of an economy is given by AD = 51 - 0.2P,...
1. Labour Market. Draw a diagram of the labour market where there above the equilibrium level....
1. Labour Market. Draw a diagram of the labour market where there above the equilibrium level. Use I to denote the amount of labour to denote the amount of labour hired. bour market where the real wage is stuck note the amount of labour willing to work and L1 Now suppose there is an increase in technology that raises the demand the new demand curve and explain what happens to the and curve and explain what happens to the number...
The graph below depicts the aggregate demand, Irrun aggregate supply, and short-run aggregate supply curves for...
The graph below depicts the aggregate demand, Irrun aggregate supply, and short-run aggregate supply curves for the United States at an initial long-run macroeconomic equilibrium Price level] (P) LRAS SRAS Real GDP Consider a situation in which two things happen simultaneously: there is a deterioration of institutions, and the federal government massively increases spending. Which of the graphs below illustrates the shifts in this model given this situation? Price level Price level (P) (P) URAS LRAS, LRAS SRAS SRAS SRAS...
If unemployment is below the natural level in the short-run, what is likely to happen in...
If unemployment is below the natural level in the short-run, what is likely to happen in the long run if the government does not intervene? Select one: O a. Wages are likely to fall causing many workers to leave their job b. Welfare payments will continue to rise c. Interest rates are likely to fall, causing more investment d. People will end up paying more income tax, which will slow down consumption e. The economy cannot adjust on its own;...
The drop down menu for B is price level (decreases, increases, returns to initial value) and...
The drop down menu for B is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
The drop down menu for D is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
Use the AD/AS model below to answer the following questions. In each case, assume the economy starts In long- and short-run equilibrium. The Macroecono in long- and short-run equilibrium LRAS SRAS 100.0... AD Real...
The graphs illustrate an initial equilibrium for the economy. Suppose that oil prices temporarily decrease Use...
The graphs illustrate an initial equilibrium for the economy. Suppose that oil prices temporarily decrease Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Short-run graph Long-run graph...
Figure 16-1 Price level LRAS SRAS D AD AD AD Real GDP Refer to Figure 16-1....
Figure 16-1 Price level LRAS SRAS D AD AD AD Real GDP Refer to Figure 16-1. Suppose the economy is in short-run equilibrium above potential GDP and automatic stabilizers move the economy back to long-run equilibrium. Using the static AD- AS model in the figure above, this would be depicted as a movement from OD to C Eto A. B to A A to E. Cto B.
New LRAS, SRAS, and AD lines in the graph for the next
year:
Price level The following graph shows an economy in long-run macroeconomic equilibrium. All the usual assumptions of the dynamic demand and supply model hold Firms and workers expect there to be a decline in the inflation rate in the coming year LRAS, SRAS Use the line tool to draw three lines 1) the new LRAS, 2) the new SRAS, and 3) the new AD line in the...
The following graph shows the economy in long-run equilibrium at
the expected price level of 120 and the natural level of output of
$600 billion. Suppose a sudden and severe contraction in the
housing market reduces the value of homes and causes consumers to
spend less.Shift the short-run aggregate supply (AS) curve or the aggregate
demand (AD) curve to show the short-run impact of
the housing market slump.In the short run, the decrease in consumption spending
associated with the housing...
1. Labour Market. Draw a diagram of the labour market where there above the equilibrium level. Use I to denote the amount of labour to denote the amount of labour hired. bour market where the real wage is stuck note the amount of labour willing to work and L1 Now suppose there is an increase in technology that raises the demand the new demand curve and explain what happens to the and curve and explain what happens to the number...
The graph below depicts the aggregate demand, Irrun aggregate supply, and short-run aggregate supply curves for the United States at an initial long-run macroeconomic equilibrium Price level] (P) LRAS SRAS Real GDP Consider a situation in which two things happen simultaneously: there is a deterioration of institutions, and the federal government massively increases spending. Which of the graphs below illustrates the shifts in this model given this situation? Price level Price level (P) (P) URAS LRAS, LRAS SRAS SRAS SRAS...
If unemployment is below the natural level in the short-run, what is likely to happen in the long run if the government does not intervene? Select one: O a. Wages are likely to fall causing many workers to leave their job b. Welfare payments will continue to rise c. Interest rates are likely to fall, causing more investment d. People will end up paying more income tax, which will slow down consumption e. The economy cannot adjust on its own;...
The drop down menu for B is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
The drop down menu for D is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
Use the AD/AS model below to answer the following questions. In each case, assume the economy starts In long- and short-run equilibrium. The Macroecono in long- and short-run equilibrium LRAS SRAS 100.0... AD Real...
The graphs illustrate an initial equilibrium for the economy. Suppose that oil prices temporarily decrease Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Short-run graph Long-run graph...
Figure 16-1 Price level LRAS SRAS D AD AD AD Real GDP Refer to Figure 16-1. Suppose the economy is in short-run equilibrium above potential GDP and automatic stabilizers move the economy back to long-run equilibrium. Using the static AD- AS model in the figure above, this would be depicted as a movement from OD to C Eto A. B to A A to E. Cto B.
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