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ECON 202 Lecture 1: Short-answer questions chapter 12,13,16.pdf

93 views21 pages
16 Apr 2015
School
University of Waterloo
Department
Economics
Course
ECON 202
Professor
Anis Rahman

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Document Summary

Answer: g goes down so this is a negative demand shock ad shifts to the left in the short run and then the self-correcting mechanism shifts the. As curve to the right and the output and unemployment are back to potential values but inflation is lower (similar myeconlab question) 1-5 ch12/ch13 below from textbook: suppose that the white house decides to sharply reduce military spending without increasing government spending in other areas. Comment on the effect of this measure on aggregate demand. Show your answer graphically: oil prices declined in the summer of 2008, following months of increases since the winter of 2007. Considering only this fall in oil prices, explain the effect on short-run aggregate supply and long-run aggregate supply, if any. (my econ lab has this one too ch 12. 1) Suppose in an effort to reduce the current federal budget deficit, the. White house decides to sharply decrease government spending.

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Related Questions

It is stated that the equilibrium level of output is the most important concept in all of economics. The economy is at its best when short-run supply and aggregate demand intersect in the long-run aggregate supply curve. Suppose we are at this point. Now suppose that there is a positive aggregate demand shock that shifts out the aggregate demand curve in the short run.

What is the impact on both the quantity supplied and price?

How does the economy adjust back to the long run if the government takes NO corrective action?

What would be the impact if the government does take action to get the economy back to the long run?

Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or the left?). Also determine the effect on the price level, the real output level, and employment/unemployment. Explain and express this graphically using the AS/AD macro model.


In late 2004, oil prices increased sharply while the rate of growth in labor productivity declined. The combination of these two factors should shift the short-run aggregate supply curve up (left). The increase in oil prices, when combined with the slowdown in productivity growth, will likely result in higher costs for firms at each output level. To offset these higher costs, firms increase their prices at each output level, causing the short-run aggregate supply curve to shift up (left).

An increase in government spending on goods to build or repair infrastructure.

a. Shifts the aggregate demand curve to the right.

b. Has a multiplier effect.

c. Shifts the aggregate supply curve to the right, but this effect is likely more important in the long run.

d. All of the above are correct.