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Assume the U. economy was operating at a short-run equilibrium when interest rates for investment loans increased. In the long run, which of the following shift to the right, shift to the left, or remain the same? I) What component of aggregate demand will change?
And now I have to do the short-run Phillips curve, and that will show a relationship between inflation rate and unemployment. So remember, Phillips curves show the relationship or the theoretical relationship between the unemployment rate and the inflation rate. So pause this video if you are inspired to do so, but I will now work through it. When labor becomes cheap enough, producers will make profit though aggregate demand may lag for a bit longer. C) Based on your answer in part (b), what is the impact of the reduction in government spending on people who have a fixed income?
During the capital inflow process, the rest of the world wants USD because they can only invest using US dollars inside the U. S. This increases thedemand for USD in the foreign exchange market and appreciates the value of USD in terms of other foreign currency. So if our actual unemployment rate is higher than natural rate of unemployment, what will happen to the short-run aggregate supply? Aggregate supply means the number of commodities manufactured by all the producers in an economy at the prevailing price level. Currency X's currency for exchange will go up. Let me draw it like that. So you have to be very careful here.
But what about the short-run aggregate supply curve? And then they say, label the short-run equilibrium as point B. You could also think at a given output level, you would have a lower price level, at a given price level. And so people say, hey, if you want me to work, you gotta pay me a little bit more, and so that could just lead to a higher inflation rate. Want to join the conversation? Draw a correctly labeled graph of aggregate demand and short-run aggregate supply, and show the impact on the equilibrium price level and real GDP of the fiscal policy action identified in part (c). Well, that's going to be upward sloping. Ii) Equilibrium price level, labeled PL1. Question: The economy of Brazil is in long-run equilibrium with full employment. And then let's draw an aggregate demand curve. And now we have a different equilibrium real GDP, so that is going to be Y sub two. The Foreign Exchange market answer towards the end for Q. e & f are not correct.
Watch me answer it here. Participants will be expected to attend the entire week of training and participate in all activities as scheduled. A) Draw a correctly labeled graph of long-run aggregate supply, short-run aggregate supply, and aggregate demand. Participants will be given guidance in development of a class syllabus as well as a review of the most recent exam. So we could say because of high unemployment, that could apply wage pressure. So this is the short-run Phillips curve, which is downward sloping. Which of the following defines a business goal for system restoration and. So I'm gonna do the inflation rate in the vertical axis which is typical. I drew it to the left of the long-run aggregate supply curve.
This preview shows page 1 - 2 out of 2 pages. They're saying a fiscal policy action, not a monetary policy. So our short-run aggregate supply would look like that. So our unemployment rate right over here is 7%, and our inflation rate right over here is 3%. Label the new equilibrium output and price level Y2 and PL2, respectively. This is called the crowding out effect. D) As a result of an increase in exports, export oriented industries increase expenditures on new container ships and equipment. I drew it to the left of the full employment output because we are dealing with a recession here. So here they're saying short-run aggregate supply curve, explain.
And we could say, because national income has gone up, people will buy more imports, so the supply of Country X's currency for exchange will go up. And they say the short-run equilibrium we have an unemployment rate of 7% and an inflation rate of 3%. So let me draw a graph to even help to visualize this. All right, let's do the next section. Aggregate Demand refers to the total quantity of services and commodities demanded in an economy at the existing price level. Read more about the curve shifts of this and learn the AD-AS model through an example. I don't understand the point that the firms increasing production simply because labor becomes cheaper in the situation where there's no demand. Plot the numerical values above on the graph. Think of the business cycle.
And so it'll be a vertical line at our natural rate of unemployment which is 5%. Was this an example of the long free response question or one of the shorter ones? Why does AS in short run shift to the right when there's high unemployment in an economy? Identify a fiscal policy action that could be used to reduce the unemployment rate in the short run. All right, part (f). We could say wages come down which would shift the short-run aggregate supply curve to the right. On the AP Macroeconomics lessons, we learn that due to expansionary fiscal policy, the government borrows loans because of the deficit in the budget.
And then on the horizontal axis, I am going to do my unemployment rate. I am looking forward to meeting you and working with you during our four days together. Become a member and unlock all Study Answers. A) Identify the effect of the change in investment spending on each of the following: Real output.
All right, we have more parts here. Based on the change in real GDP identified in part (d), will the supply of Country X's currency in the foreign exchange market increase, decrease, or remain the same, explain? Our unemployment rate is higher than the natural level of unemployment. And if national income has gone up, people are gonna do a lot more of everything including buying imports. Or for a given amount of output, it might cost less because there's just people out there competing for that work. If you said hey, we would change the federal funds rate or we would increase the money supply or decrease the money supply, those would be monetary actions.
And you have your equilibrium price level, PL sub one. I'll call that sub one, since we're gonna think about how it shifts, and then aggregate demand would look something like this. So you see our price level goes up and our aggregate output, our GDP, our real GDP, goes up as well. New container ships and equipment are increases in capital and therefore Investment will increase. So this is going to be my unemployment rate which is going to be a percentage. It'll just be a vertical line. Well, if you hold all else equal, but you increase the supply of something, well, then the price of it is going to go down. If you have low rate of unemployment, especially if it's below your natural rate of unemployment, well then there's a lot of demand for people. Learn more about this topic: fromChapter 7 / Lesson 3. They're gonna demand more 'cause now they have more money in their pockets, and so it's going to shift to the right. Based on your answer to part (e) and assume a flexible exchange rate system, will Country X's currency appreciate, depreciate, or remain the same in the foreign exchange market? That interest rate then lowers the investment demand.
And so you would have your short-run aggregate supply curve shift to the right, short-run aggregate supply sub two. Answer - One point is earned for stating that real wages will fall because the price level has increased and the nominal wages are fixed in the short run. Label the current short-run equilibrium as point B. Answer - One point is earned for stating that the long-run aggregate supply curve will shift to the right because the capital stock has increased. The way I think about it is if you have real GDP increasing, you're in a situation where you just have more economic activity, the national income has gone up. That would be upward sloping, as the price level increases or the economy might be willing to output more, so that's short-run aggregate supply.