Aggregate supply and demand, Macroeconomics

Aggregate Supply and Demand

1. The equation for expenditure GDP is

2. Sketch a fully labeled aggregate supply and demand diagram for an economy that is in full employment equilibrium.

a) Add to the diagram an aggregate demand curve that demonstrates an economy with a recessionary gap. Clearly label both the new curve and the recessionary gap.

b) FULLY explain four reasons that the aggregate demand curve might have made the above shift to the left.

c) What is the effect of this recessionary gap on real GDP, the unemployment rate, and the inflation rate?

d) Add to the diagram an aggregate demand curve that demonstrates an economy with an inflationary gap. Clearly label both the new curve and the inflationary gap.

e) What is the effect of this inflationary gap on real GDP, the unemployment rate, and the inflation rate?

3. Sketch a fully labeled aggregate supply diagram. Add to the diagram a new aggregate supply line that would occur due to an improvement in technology that improves productivity.

4. If you have not already done so, add an aggregate demand curve to the diagram in question 3. What effect did the aggregate supply curve shift have on real GDP, the unemployment rate the inflation rate?

5. Suppose an economy is operating at full employment equilibrium. What component of the GDP will be affected and what will happen to real GDP, the unemployment rate, and the inflation rate levels in the face of each of the following events?

a) an increase in income taxes

b) an increase in business investment

c) the price of raw materials used in the production process increases

d) an increase in the value of the Canadian dollar

e) a decrease in interest rates

f) productivity improves as new technology is introduced

g) a decrease in highway improvement projects by the government

h) an increase in consumer savings

i) the economic climate in Canada looks strong

j) an increase in import spending

Posted Date: 2/16/2013 12:01:58 AM | Location : United States







Related Discussions:- Aggregate supply and demand, Assignment Help, Ask Question on Aggregate supply and demand, Get Answer, Expert's Help, Aggregate supply and demand Discussions

Write discussion on Aggregate supply and demand
Your posts are moderated
Related Questions
Why might external economies of scale be of interest to developing countries?

1a. Show on the market for milk the effect of the introduction of BGH (bovine growth hormone). 1b. Show on the market for cheese the impact of what happened in the milk market.

A recent study of long distance phone calls made from WPU, showed that the length of the calls follows the normal probability distribution with a mean of 3.2 minutes per call and a

:- Consider a closed capitalist economy in which all productions is undertaken by100 firms and wages and profits are theonly 2 categories of incomes. Assume further that all wages

1) The modern global economic system In finance we learn that while the future is always uncertain there are ways we gain insight and make the best possible investment decisi

Explain the meaning of a production possibilities curve

A critically important criterion that must be considered in evaluating environmental policies is whether they provide strong incentives for people to find new ways to improve ambie

DIFFICULTIES IN MEASURING THE NATIONAL INCOME  There are some conceptual and statistical problems in measuring national product. Some items are excluded from the national incom

Q. Show the equations of the AS-AD model? The equations of the AS-AD model To précis the AS-AD model, we can have a glance at its equations. IS-LM model was "solved" by s

Do you agee or disagree " Economic theory helps society reach economic goals that it has selected for itself?" Justify your answer.