in the fem if ad shifts because G increases we expect?

Question

Question

in the fem if ad shifts because G increases we expect?

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

If aggregate demand shifts due to increase in Government expenditure ( G ) , it will shift rightwards . In the full employment model ( fem ) , because the economy is already at full capacity and prices and wages are assumed flexible , the price level changes .

The AD shifting right causes rise in price level or inflationary gap , this occurs along with rise of real GDP . The actual GDP rises above potential GDP .

Add a comment

Answer 2

Similar Homework Help Questions

If the market power of firms increases, what happens in the AD/AS model? Aggregate demand shifts...

If the market power of firms increases, what happens in the AD/AS model? Aggregate demand shifts to the right. Aggregate supply shifts to the right. Aggregate supply shifts to the left. Aggregate demand shifts to the left.
When the price level falls, aggregate demand ______. decreases and the AD curve shifts leftward does...

When the price level falls, aggregate demand ______. decreases and the AD curve shifts leftward does not change, but the quantity of real GDP demanded decreases and a movement up along the AD curve occurs does not change, but the quantity of real GDP demanded increases and a movement down along the AD curve occurs increases and the AD curve shifts rightward When Europe trades with Mexico and goes into a recession, ______.
If the AD curve shifts to the left, what happens to a. The equilibrium rate of...

If the AD curve shifts to the left, what happens to a. The equilibrium rate of output? 6.11 points O Increases O Decreases O Does not change b. The equilibrium price level? eBook O Decreases O Does not change O Increases Print

1. True or False: Increased spending growth shifts the AD curve inward, and decreased spending growth...

1. True or False: Increased spending growth shifts the AD curve inward, and decreased spending growth shifts the AD curve outward. 2. True or False: An unexpected increase in money forth increases inflation but not real growth in the long run. 3. True or False: When unions exert a great deal of influence, the effect on labor markets is similar to that of a minimum wage.
Inflationary pressure in the AS-AD model can be shown as a leftward shift of the AD...

Inflationary pressure in the AS-AD model can be shown as a leftward shift of the AD curve when the economy is already producing at its potential GDP. supply shock that shifts the AS to the right. rightward shift of the AD curve when the economy is already producing at its potential GDP. Typically, if consumer and business confidence is high then ________ and if consumer and business confidence is low then ________. AD shifts to the left; AD shifts to...
Price of Bonds Inf. ASR 895 AD Quantity of Bonds 23) Please use the graphs above....

Price of Bonds Inf. ASR 895 AD Quantity of Bonds 23) Please use the graphs above. If the Federal Reserve Bank increases the federal funds rate. what would happen in the bond market? A) Price of bonds increases B) Return on interest decreases C) Supply of bonds increases D) Demand for stocks increases 24) From question 23, what would happen in the AD/AS graph? A) AD shifts left B) AS shifts right C) AD shifts right D) AS shifts left...

Demand increases(shifts up to the right) Demand falls (shifts down to the left) Supply increases(shifts to...

Demand increases(shifts up to the right) Demand falls (shifts down to the left) Supply increases(shifts to the right) Supply falls (shifts to the left) Consider the market for electricity. Would each of the following factors increase demand, reduce demand, increase supply, or reduce supply in the market for electricity? Mark one answer in each row. Consumers’ incomes rise. The price of natural gas rises. (This is used as a fuel in homes and in power generation.) Consumers buy more energy-efficient appliances. The government...
Using the following figure, suppose that a change in fiscal policy shifts AD from AD (1)...

Using the following figure, suppose that a change in fiscal policy shifts AD from AD (1) to AD (2). Which response would be most likely to cause that shift? Choose one of a, b, c, or d. A rise in taxes OR a rise in government spending A rise in taxes OR a fall in government spending A fall in taxes OR a rise in government spending A fall in taxes OR a fall in government spending
The imposition of an ad valorem tax: a. shifts the demand curve up by the amount...

The imposition of an ad valorem tax: a. shifts the demand curve up by the amount of the tax. b. None of the options. c. rotates the demand curve in a counter-clockwise direction. d. rotates the demand curve in a clockwise direction. e. shifts the demand curve up by the amount of the tax.

Many business leaders say something to the effect, “We practice empowerment because we do not expect...

Many business leaders say something to the effect, “We practice empowerment because we do not expect our employees to leave their brains at the door.” What are these leaders talking about?

in the fem if ad shifts because G increases we expect?

Homework Answers

Add Answer to:
in the fem if ad shifts because G increases we expect?

Post as a guest

Earn Coins

If the market power of firms increases, what happens in the AD/AS model? Aggregate demand shifts...

When the price level falls, aggregate demand ______. decreases and the AD curve shifts leftward does...

If the AD curve shifts to the left, what happens to a. The equilibrium rate of...

1. True or False: Increased spending growth shifts the AD curve inward, and decreased spending growth...

Inflationary pressure in the AS-AD model can be shown as a leftward shift of the AD...

Price of Bonds Inf. ASR 895 AD Quantity of Bonds 23) Please use the graphs above....

Demand increases(shifts up to the right) Demand falls (shifts down to the left) Supply increases(shifts to...

Using the following figure, suppose that a change in fiscal policy shifts AD from AD (1)...

The imposition of an ad valorem tax: a. shifts the demand curve up by the amount...

Many business leaders say something to the effect, “We practice empowerment because we do not expect...

in the fem if ad shifts because G increases we expect?

Homework Answers

Add Answer to: in the fem if ad shifts because G increases we expect?

Post as a guest

Earn Coins

Add Answer to:
in the fem if ad shifts because G increases we expect?