2. If the economy's price level increases from an initial level, Po, to a higher level,...
Homework Answers
Output level will decline
Y2<Y1
Real interest rates level will increase
r2>r1
Why
M/P = L(Y,r)
if P is increased with constant money supply, RHS value will be decreased evident by decrease in Output and increase in Real interest rates.
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2.
If the economy's price level
increases from
an initial level, Po,
to a higher level,...
The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed.
Aggregate demand curve The following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply. A lower price level leads to a lower interest rate. A higher price level makes domestically produced goods more expensive than foreign goods. A lower price level increases consumption through the income effect. As the aggregate price level rises, the purchasing power of households' saving balances...
The exchange rate effect of a price increase is: if the US price level increases, then the Fed increases interest rate i...
The exchange rate effect of a price increase is: if the US price level increases, then the Fed increases interest rate in order to stabilize the price level. As a result US dollar appreciates causing US exports to decreases. a. False b. True If the Fed increases money supply, then: a. the value of money decreases. b. the price level increases. c. Both of the above d. none of the above Which of the following will the Aggregate Demand curve...
Question 16 If the price level increases in the United States relative to foreign...
Question 16 (1 point)If the price level increases in the United States relative to foreign countries, then American consumers will purchase more foreign goods and fewer U.S. goods. This statement describes:Question 16 options:the output effect.the shift-of-spending effect.the real-balances effect.the foreign purchases effect.Question 17 (1 point)Refer to the diagram. If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be:Question 17 options:E and B, respectively.F and A, respectively.G...
In the long run, the aggregate price level increases. This Select one: a. Is due to...
In the long run, the aggregate price level increases. This Select one: a. Is due to the short run AS curve shifting to the right and the economy producing a level of aggregate output that is not equal to its potential output b. is due to the AD curve shifting to the right c. Has no effect on the level of aggregate production in the economy. d. Results in the economy moving to the level of production where aggregate output...
The long-run equilibrium level of output is determined by (changes in the price level, consumer demand,...
The long-run equilibrium level
of output is determined by (changes in the price level,
consumer demand, capital, labor, and technology);
Therefore it will (increase to a new equilibrium, remain at
the full-employment level, decrease to a new equilibrium)
if the aggregate demand curve shifts to the right.
5. The long-run aggregate supply curve Aa Aa Suppose the hypothetical economy of Larryopia produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple line (diamond symbols)...
12. When the Federal Reserve increases the money supply, at a given price level the amount...
12. When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is and the aggregate demand curve shifts a. greater, inward b. greater, outward c. lower, inward d. lower, outward 13. Aggregate supply is the relationship between the quantity of goods and services supplied and the a. Money supply b. Unemployment rate c. Interest rate d. Price level If a short-run equilibrium occurs at a level of output above the natural level,...
Help with graph, fill in the blanks and drop downs.Drop Downs:1. more/less2. higher/lower...
Help with graph, fill in the blanks and drop downs.Drop Downs:1. more/less2. higher/lower3. (short-run change in output):no change/decrease/increase4. (long-run change in price level):same/lower/higher than/as initial expectations5. (long-run change in output):no change/decrease/increase4. The rational expectations model Suppose the U.S. economy is in equilibrium at a potential output of $10 trillion so that unemployment is at the natural rate. At the beginning of the year, the Federal Reserve announces that its monetary policy will aim to maintain output at potential output and sustain...
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a...
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a standard IS-LM-FE framework while the short-run aggregate supply side is characterized by (SRAS) aggregate output/income, Y is the full employment output level, P is the Here Y is realized aggregate realized price level, Pe is the expected price level and b is a constant that depends on the slope of the labour demand curve. Explain the effects of each of the following on the...
1. Which of the following properly describes the interest-rate effect? a. A higher price level leads to higher money demand, higher money demand leads to higher interest rates, and a higher interest rate increases the quantity of goods and serv
1. Which of the following properly describes the interest-rate effect? a. A higher price level leads to higher money demand, higher money demand leads to higher interest rates, and a higher interest rate increases the quantity of goods and services demanded.b. A higher price level leads to higher money demand, higher money demand leads to lower interest rates, and a lower interest rate reduces the quantity of goods and services demanded.c. A lower price level leads to lower money demand, lower...
1. If the economy is at full employment, increases in government spending: A) have a multiplier...
1. If the economy is at full employment, increases in government spending: A) have a multiplier effect on equilibrium output. B) have no effect on the aggregate price level. C) are primarily absorbed by price increases. D) reduce aggregate output. 2. Which of the following measures is NOT an example of discretionary fiscal policy? A) The unemployment compensation program pays out more money as unemployment rates rise. B) Tax rates are increased in the hope of slowing down the rate...
In the long run, the aggregate price level increases. This Select one: a. Is due to the short run AS curve shifting to the right and the economy producing a level of aggregate output that is not equal to its potential output b. is due to the AD curve shifting to the right c. Has no effect on the level of aggregate production in the economy. d. Results in the economy moving to the level of production where aggregate output...
The long-run equilibrium level
of output is determined by (changes in the price level,
consumer demand, capital, labor, and technology);
Therefore it will (increase to a new equilibrium, remain at
the full-employment level, decrease to a new equilibrium)
if the aggregate demand curve shifts to the right.
5. The long-run aggregate supply curve Aa Aa Suppose the hypothetical economy of Larryopia produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple line (diamond symbols)...
12. When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is and the aggregate demand curve shifts a. greater, inward b. greater, outward c. lower, inward d. lower, outward 13. Aggregate supply is the relationship between the quantity of goods and services supplied and the a. Money supply b. Unemployment rate c. Interest rate d. Price level If a short-run equilibrium occurs at a level of output above the natural level,...
Help with graph, fill in the blanks and drop downs.Drop Downs:1. more/less2. higher/lower3. (short-run change in output):no change/decrease/increase4. (long-run change in price level):same/lower/higher than/as initial expectations5. (long-run change in output):no change/decrease/increase4. The rational expectations model Suppose the U.S. economy is in equilibrium at a potential output of $10 trillion so that unemployment is at the natural rate. At the beginning of the year, the Federal Reserve announces that its monetary policy will aim to maintain output at potential output and sustain...
B4. Closed economy Keynesian model: The aggregate demand-side of the economy Rigidia is well-described by a standard IS-LM-FE framework while the short-run aggregate supply side is characterized by (SRAS) aggregate output/income, Y is the full employment output level, P is the Here Y is realized aggregate realized price level, Pe is the expected price level and b is a constant that depends on the slope of the labour demand curve. Explain the effects of each of the following on the...
1. If the economy is at full employment, increases in government spending: A) have a multiplier effect on equilibrium output. B) have no effect on the aggregate price level. C) are primarily absorbed by price increases. D) reduce aggregate output. 2. Which of the following measures is NOT an example of discretionary fiscal policy? A) The unemployment compensation program pays out more money as unemployment rates rise. B) Tax rates are increased in the hope of slowing down the rate...
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