None [Related to Solved Problem 9.4] In the aftermath of the 2007-2009 financial crisis, the Fed becameconcerned about deflation.The two graphs to the right show the economy in equilibrium. Using the IS-MP model and thePhillips curve, show how a decrease in aggregate expenditure could cause deflation.1.) Using the line drawing tool, show how a decrease in aggregate expenditure affects the economy.Properly label any curves that you draw.2.) Using the point drawing tool, plot the new equilibrium point in the IS-MP model. Label this pointB₁S3.) Using the point drawing tool, plot the new equilibrium point in the Phillips curve model. Label thispoint Bpc-Carefully follow the instructions above, and only draw the required objects.Real interest rateIS₁MP1Output gapSelect a graph by clicking it before selecting a tool from the palette.Inflation rateOutput gapQPC₁ QGGQ

A decrease in aggregate expenditure shifts the IS curve leftward indicating a fall in real output…

Answered: [Related to Solved Problem 9.4] In the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3/25/22, 8:59 PM Assignment Print View 8. Assume the economy is currently in equilibrium at its full-employment level of output, the money market is in equilibrium, and the MPC = 0.75. a. Suppose there is an increase in government spending that causes aggregate demand to increase by $16 billion. Show the increase in aggregate demand on the graph. Instructions: Use the tool provided "Aggregate Demand" to plot the new aggregate demand curve. Use the tool provided "New GDP" to plot the new equilibrium. AD and AS Model 200 Tools LRAS 180 AS 160 Aggregate Dei New GDP 140 120 100 80 60 AD 40 20 16 32 48 64 80 96 112 128 144 160 Real GDP (billions of dollars) Now suppose the Federal Reserve wants to keep inflation from hurting the economy and maintain output at the full-employment level. https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=8.&postSubmissionView=13252718377637707&wid=13252718466136846&rol... 1/3 Price Level
During the recent recession sparked by financial crisis, the U.S. economy suffered tremendously. Suppose that, due to the recession, U.S. GDP dropped from $14 trillion to $12.5 trillion. This fall in GDP was due to a drop in consumption of $1 trillion and a drop in investment of $500 billion. The U.S. government, under the Obama administration, responded to this recession by increasing government purchases. Instructions: Round your answer to one decimal place. a. Suppose that government spending had no impact on consumption, investment, or net exports. If the Obama administration wanted to bring GDP back up to $14 trillion, government spending would have to rise by $ 1.5 trillion Instructions: Round your answer to the nearest whole number. b. Many economists believe that an increase in government spending doesn't just directly increase GDP, but it also leads to an increase in consumption. If government spending rises by $1 trillion, in order to bring GDP back to $14 trillion,…
Suppose the Federal government raises taxes which would decrease consumption by $50 billion, that the spending multiplier was 5, the money supply was $500 billion, and the inflation rate was 5%. Using the formula with "Multiplier = change in equlibrium GDP/initial change in spending formula" to calculate the equilibrium U.S. GDP with the above information (Note: Please show the full calculation of the equilibrium U.S. GDP with formula and step by step)
Figure 1. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs. MS P AD₂ AD3 AD1 MD₂ MD Y Refer to Figure 1. Suppose the multiplier is 3 and the government increases its purchases by $25 billion. Also, suppose the AD curve would shift from AD₁ to AD₂ if there were no crowding out; the AD curve actually shifts from AD₁ to AD3 with crowding out. Finally, assume the horizontal distance between the curves AD₁ and AD3 is $30 billion. The extent of crowding out, for any particular level of the price level, is Select one: a. $30 billion. b. $25 billion. c. $60 billion. Od. $45 billion.
Chapter: A simple model of macroeconomics: Fiscal policy and Monetary Policy Q) Using the Aggregate supply and Aggregate Demand Model, examine the influence of government expenditure on investment in a nation. Use Jot Inc. Ltd a multinational construction company in which you are the Chief Exec of the firm that that is highly diversified and recieves funds to construct highways and other government funded projects. Also, explain the factors that cause the Aggregate Demand curve to be downward sloping left to right.answer the questions from below figure.
The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose firms become pessimistic about future business conditions and cut back on investment spending. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism. In the short run, the decrease in investment spending associated with business pessimism causes the price level to (rise above/fall below) the price level people expected and the quantity of output to (rise above/fall below) the natural level of output. The business pessimism will cause the unemployment rate to (rise above/fall below) the natural rate of unemployment in the short run. Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $600 billion, prior to the…
In order to break stagflation, the government has to increase expenditure on food subsidies in the form of food vouchers, unemployment benefits or allowances, wages subsidy to increase household consumption expenditure and boost up the AD. With increased consumption expenditure, aggregate demand will rise, which would send a signal to the aggregate supply (AS) to raise production. This will create a positive effect, which will bring the economy out of recession. Show this in a graph.
QUESTION 26 Figure 34-2. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs. "2 "1 MS -MD 2 -MD₁ 1 P2 P₁ 1₂2 1₁ AD Refer to Figure 34-2. If the graphs apply to an economy such as the U.S. economy, then the slope of the AD curve is primarily attributable to the a. interest-rate effect. b. Fisher effect. c. exchange-rate effect. d. wealth effect.
1. Inflation is increasingly becoming a concern among economists. One of the heads of Bank of America has predicted that consumer prices will increase by 8% by the end of 2021. Using the AD/SRAS/LRAS graph show how inflation will effect the AD curve. (Start the graph at the macroequilibrium point and show the changes) 2. In the graph that you have drawn in question 1, what is the state of the economy? Using fiscal policy,explain how would you bring the economy back to the macroequilibrium point. 3. In the graph that you have drawn in question 1, what is the state of the economy? Using monetary policy, explain how would you bring the economy back to the macroequilibrium point.
During 2008, the United States began to experience what has become known as the Financial Crisis. The Financial Crisis resulted in a drop in housing prices and negatively shocked AD resulting in unemployment. Real GDP fell from $13.64 Trillion to $13.26 Trillion. (Here is a link to Google Data’s Real GDP graph: Google Data - Real GDP. Be sure to fully answer each question in your response. 1. Describe the problem in context of an Aggregate Demand/Aggregate Supply model. What happened to equilibrium output and the price level? 2. Design a fiscal policy tool using government spending or the tax system that would attempt to fix the problem. Describe that fiscal policy tool in complete detail. Why did you choose that particular method? The reduction in GDP was about $380,000,000,000 (Three hundred and eighty billion dollars.) 3. With this large of a drop, what size fiscal policy tool would your recommend? How does the multiplier play into things? 4. What are potential…
During 2008, the United States began to experience what has become known as the Financial Crisis. The Financial Crisis resulted in a drop in housing prices and negatively shocked AD resulting in unemployment. Real GDP fell from $13.64 Trillion to $13.26 Trillion. (Here is a link to Google Data’s Real GDP graph: Google Data - Real GDP. Be sure to fully answer each question in your response. 1. Describe the problem in context of an Aggregate Demand/Aggregate Supply model. What happened to equilibrium output and the price level? 2. Design a fiscal policy tool using government spending or the tax system that would attempt to fix the problem. Describe that fiscal policy tool in complete detail. Why did you choose that particular method? The reduction in GDP was about $380,000,000,000 (Three hundred and eighty billion dollars.) 3. With this large of a drop, what size fiscal policy tool would your recommend? How does the multiplier play into things? 4. What are potential…
In February 2021, retail sales fell by 3.3% compared to January. What does the drop in retail sales indicate about how consumption has changed? Investment spending fell by 2.2% in February. How will these changes affect aggregate expenditures? How will equilibrium GDP be affected? How do you think the stimulus checks that many Americans will receive will affect consumption? How will that affect aggregate expenditures and GDP and employment? Do you expect the change in aggregate expenditures be temporary or permanent? Part of the stimulus package passed by Biden includes an extra $300 per week in unemployment benefits. Do you agree with the stimulus checks and additional $300 per week in unemployment benefits? Why or why not?

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