- Aggregate Supply 20 Explain For Each Event Whether It Changes The Quantity Of Real Gdp Supplied Short Run Aggre Gate 1 (88.09 KiB) Viewed 34 times
- Aggregate Supply 20 Explain For Each Event Whether It Changes The Quantity Of Real Gdp Supplied Short Run Aggre Gate 2 (105.64 KiB) Viewed 34 times
a equilibrium after aggregate supply changed? If potential GDP is $1 trillion does the economy have an inflationary gap, a recessionary gap, or no output gap? 10. Some events change aggregate demand from AD to AD, and aggregate supply from SAS to SAS What is the new macroeconomic equilibrium? Use the following data to work Problems 11 to 13. The following events have occurred in the history of the United States: • A deep recession hits the world economy. • The world oil price rises sharply. U.S. businesses expect future profits to fall. 11. Explain for each event whether it changes short- run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them. 12. Explain the separate effects of each event on U.S. real GDP and the price level, starting from a position of long-run equilibrium. 13. Explain the combined effects of these events on U.S. real GDP and the price level, starting from a position of long-run equilibrium. Use the following data to work Problems 14 and 15. The table shows the aggregate demand and short-run aggregate supply schedules of a country in which potential GDP is $1,050 billion. Real GDP Real GDP supplied demanded in the short run Price level Ibillions of 2005 dollars 100 1,150 1,050 110 1,100 1,100 120 1,050 1,150 130 1,000 1,200 140 950 1.250 150 900 1.300 850 1,350 14. What is the short-run equilibrium real GDP and price level? Does the country have an inflationary gap or a recessionary gap and what is its magnitude? 16. Geithner Urges Action on Economy Treasury Secretary Timothy Geithner is reported as having said that the United States can no longer rely on consumer spending to be the growth engine of recovery from recession. Washington needs to plant the seeds for business investment and exports. "We can't go back to a situation where we're depending on a near short- term boost in consumption to carry us forward." he said. Source: The Wall Street Journal September 12, 2010 a. Explain the effects of an increase in consum- er spending on the short-run macroeconomic equilibrium b. Explain the effects of an increase in business investment on the short-run macroeconomic equilibrium. c. Explain the effects of an increase in exports on the short-run macroeconomic equilibrium. Macroeconomic Schools of Thought (Study Plan 10.4 17. Describe what a classical macroeconomist, a Keynesian, and a monetarist would want to do in response to each of the events listed in Problem 11. 18. Krugman on Monetary and Fiscal Policy New York Times columnist and Nobel Laureate economist Paul Krugman has launched an all-out attack on the monetary policy actions and inac- tions of Fed Chairman Ben Bernanke. Bernanke has increased the quantity of money by histori- cally large amounts and in mid-2012 was cau- tiously trying to determine whether more stimu- lacion was needed. Krugman says Bernanke is too cautious and should print money faster and move the inflation rate upward. Krugman also wants Congress to cut taxes and increase spending. And his advice to boost gov- crnment spending isn't limited to the United States. He says European governments should boost their spending too Sources: The New York Times, Washington Post, and other papers and blogs, April, 2012 a. Explain which macroeconomic school of thought Paul Krugman most likely represents in the views described above. b. Explain which macroeconomic school of thought supports Ben Bernanke's actions de scribed above. 19. Based upon the news dip in Problem 16, explain which macroeconomic school of thought Treasury Secretary Timothy Geichner most likely follows. 160