Problem Set # 14. Instructions: Graph 1,
|
|
- Daisy Smith
- 6 years ago
- Views:
Transcription
1 Problem Set # 14 Aggregate Demand and Aggregate Supply in the Real World Overview: In this problem set, you will apply what you know about Aggregate Demand and Aggregate Supply to real world data. In a series of two graphs, you will plot the condition of the U.S. economy at different periods of time. You will analyze changes which occurred in terms of the Aggregate Demand and Short-Run Aggregate Supply model. Note: In chapter 10, we concentrated on changes in the money supply as shifters of AD. When doing this assignment, you should broaden your (AD) scope. i.e. Remember that other things can shift AD. Any change in real spending (for example, an autonomous change in investment spending) will shift AD. Graph 1: Instructions: Graph 1, * Use Price on Your Vertical Axis * a. On a sheet of graph paper or spreadsheet printout, neatly plot the Price Level (vertical axis) and Real GDP (horizontal axis) for each year from 1929 to to 15 is a good range for price level axis. $400 B to $900 B is a good range for the Real GDP axis. Label each point with the year. The data for this can be found on page 2. b. Draw AD and SRAS curves through your points. Clearly label each curve with its year. Make sure that your AD and SRAS SRAS curves have the same slope. Make sure that no AD curve crosses any other AD curve. Make sure that no SRAS curve crosses any other SRAS curve. You can use the same AD curve for more than one point if the points will easily fit on the same AD curve. Likewise, you may use the same SRAS curve for more than one point if the points will easily fit on the same SRAS curve. c. Summarize the major economic events of the period. Was there a typical recession (falling output accompanied by downward price pressure) followed by a recovery? Was there a period of stagflation (falling output combined with upward price pressure)? Was there a long period of economic growth? This should be neatly typed on a separate sheet of paper. d. Analyze your data in the context of AD and SRAS. For example, if there was a recession, was its major cause a change in AD? Or, did a change in SRAS cause the downturn? As another example, if there was an expansion/recovery, was is it caused by changes in SRAS or in AD or both? In short, tell me how the shifts of the curves caused the economic outcomes of the time. Then, based on data given in this handout (or from class, the text, etc.) speculate as the causes of the shifts in AD 1
2 or SRAS. Make your speculation as intelligent and fact based as possible. This, along with your answers to 1c, should be neatly typed on a separate sheet of paper. Finally, tell me how quickly the economy seems to have been adapting to the long-run. Was SRAS shifting rapidly (enough to offset changes in AD) or slowly (too slow to offset any changes in AD)? The Data: Year Price Level Real GDP M1 Real G Real I Real Taxes Real 92 GDP Deflator Billions of 92 $'s Billions of $'s Billions of 92 $'s Billions of 92 $'s Billions of 92 $'s Net Priv. Debt Year $ $ $ $ $ $ $ $ $ $ $ $ Instructions: Graph 2 * Use the Modified AD-SRAS Model * Notes on Inflation Expectations and the Modified AD-SRAS Model: Believe it or not, the Great Depression is relatively easy to analyze within the AD-SRAS model. The reason is that there is less reason to worry about the effect of inflation expectations on the year to year shifts of AD and SRAS. Simply put, prior to 1929, the economy had not seen long periods of continuous inflation. Expected inflation (according to adaptive expectations theory) can be assumed to have been about 0%. This is no longer true once we move into the time periods examined in graphs 2, 3, and 4. During these time periods, the 70, 80 s, and 90 s, people in the economy came to expect a certain inflation rate. According to adaptive expectations theory, they would base their inflation expectations on inflation rates from years recently past. This would cause both AD and SRAS to shift up, automatically, by the expected inflation rate even if nothing else changed. 2
3 For example, assume that buyers, sellers, workers, heck everybody, expects 2% inflation. Each year, buyers would be willing to pay 2% more for the same goods and services as before. This will cause AD to shift up automatically. Wages and other costs will also have to increase by 2% a year just to keep workers (and other resource owners) up with expected inflation. i.e. If firms want workers to work the same amount, firms will have to automatically raise their wages 2% a year. Because of their (2% a year) increase in costs, year, sellers would only be willing to produce the same amount if they receive 2% more for it. SRAS will therefore automatically shift up by 2% a year. In figure 1a this economy is graphed according to the conventional AD-SRAS model. Yowsa! A new AD and SRAS curve have to be drawn each year even though there is no major changes in the economy. Since the economy has been experiencing 2% inflation and everyone expects 2% inflation in the near future, both AD and SRAS shift upwards by 2% a year. Hmmm lot of work just to depict an economy that is doing everything the same (including the 2% inflation rate) as it has done in the past. Figure 1: Two ways of depicting the same thing: An economy with no growth of real GDP and no change in the inflation rate. Figure 1a ( ) Figure 1b ( ) P rising price + 1 % & AD % inflation as expected SRAS 2 AD 2 inflation rate from previous year 0% & SRAS 2 E 1 & E E 1-1 % falling price Instead of using a standard AD-SRAS model for charts 2 4, you will use a modified AD-SRAS model. The modified AD-SRAS model has the Change in the Inflation Rate on its vertical axis, not the price level. In figure 2b the economy just described (i.e. expecting 2% inflation) is graphed according the modified AD-SRAS model. A lot simpler, huh? Things get even more complex when the inflation rate changes. Consider our economy which has been expecting 2% inflation. Both AD and SRAS will shift up by 2% a year ceteris paribus. 3
4 Assume, however, that government spending increases greatly and AD increases faster than 2%, say 4%. In the normal (i.e. Price on the vertical axis) AD-SRAS model, things are a bit hairy. This is shown in figure 2a (next page). The modified AD-SRAS model handles this faster than expected growth of AD in a simpler manner as shown in. Figure 2b (below). Figure 2: Two ways of depicting the same thing: An economy expecting 2% inflation but in which AD grows faster than expected. Figure 2a ( ) Figure 2b ( ) P rising price % expected SRAS 2 AD 2Expected E 1 AD 2Actual inflation rate from previous year 0% falling price & SRAS 2 E 1 AD 2 The second reason for using the modified model is that it more directly addresses our concern as economists. We tend to ask; What causes an increase in inflation?, not What causes a 12% inflation rate? or What causes a price level of 162?. Likewise, good economists ask; How can an economy reduce inflation? rather than How can an economy achieve a 10% inflation rate? Okay back to your regular programming. Graph 2: a. On a sheet of graph paper or spreadsheet printout, neatly plot the change in the inflation rate and real GDP for each year from 1970 to % to +5% is a good range for the change in the inflation rate axis. $3,200 B to $4,200 B is a good range for the Real GDP axis. Label each point with the year. The data for this can be found on page 6. 4
5 b. Draw AD & SRAS curves through your points. Clearly label each curve with its year. Follow the same instructions as in Graph 1 b. c. What were the major economic events of the period examined? Follow the same instructions as in Graph 1 c. d. Analyze your data in the context of AD & SRAS. Follow the same instructions as in Graph 1d. The Data: Year GDP PI ('92 = 100) Inflation Inflation Real '92 GDP (Billions) % 0.8% $ 3, % -0.3% $ 3, % -1.2% $ 3, % 1.6% $ 3, % 3.4% $ 3, % 0.3% $ 3, % -3.4% $ 4, % 0.3% $ 4, % 1.1% $ 4, % 1.1% $ 4, % 0.8% $ 4, % 0.2% $ 4, % -3.1% $ 4, % -2.1% $ 4, % -0.6% $ 5, % -0.3% $ 5, % -0.8% $ 5, % 0.4% $ 5, % 0.5% $ 5, % 0.6% $ 6, % 0.2% $ 6, % -0.4% $ 6, % -1.2% $ 6, % -0.2% $ 6, % -0.2% $ 6, % -0.2% $ 6, % -0.4% $ 6,
Problem Set # 8, ID s
Problem Set # 8, ID s 1250-2499 Aggregate Demand and Aggregate Supply in the Real World Name: Overview: In this problem set, you will apply what you know about Aggregate Demand and Aggregate Supply to
More informationLecture 22. Aggregate demand and aggregate supply
Lecture 22 Aggregate demand and aggregate supply By the end of this lecture, you should understand: three key facts about short-run economic fluctuations how the economy in the short run differs from the
More informationEconomics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary
Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level
More informationAggregate Demand & Aggregate Supply
Aggregate Demand The aggregate demand () curve shows the total amounts of goods and services that consumers, businesses, governments, and people in other countries will purchase at each and every price
More informationEconomics 102 Homework #7 Due: December 7 th at the beginning of class
Economics 102 Homework #7 Due: December 7 th at the beginning of class Complete all of the problems. Please do not write your answers on this sheet. Show all of your work. 1. The economy starts in long
More informationEconomics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary
Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level
More informationdownload instant at
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The aggregate supply curve 1) A) shows what each producer is willing and able to produce
More informationChapter 9 Chapter 10
Assignment 4 Last Name First Name Chapter 9 Chapter 10 1 a b c d 1 a b c d 2 a b c d 2 a b c d 3 a b c d 3 a b c d 4 a b c d 4 a b c d 5 a b c d 5 a b c d 6 a b c d 6 a b c d 7 a b c d 7 a b c d 8 a b
More informationThe Aggregate Demand/Aggregate Supply Model
CHAPTER 27 The Aggregate Demand/Aggregate Supply Model The Theory of Economics... is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor to draw
More informationThe aggregate supply curve shows the relationship between the aggregate price level and the quantity of aggregate output in the economy.
Chapter 32 The aggregate supply curve shows the relationship between the aggregate price level and the quantity of aggregate output in the economy. GDP Deflator can be used as a measure of the price level
More informationECON Drexel University Summer 2008 Assignment 2. Due date: July 29, 2008
ECON 202-001 Drexel University Summer 2008 Assignment 2 Due date: July 29, 2008 Instructor: Yuan Yuan Name This homework has up to 10 points bonus. Question 1 (40 points, 2 points each): MULTIPLE CHOICE.
More informationTest Review. Question 1. Answer 1. Question 2. Answer 2. Question 3. Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9. Nominal GDP.
Question 1 Test Review Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9 All of the following variables have trended upwards over the last 40 years: Real GDP The price level The rate of inflation The
More informationMACROECONOMICS - EXAM IV
MACROECONOMICS - EXAM IV Fall 2004 G. Garesché 1. a. Define a speculative bubble. What conditions must exist for a speculative bubble to occur? Give two examples of speculative bubbles which have occurred
More informationEQ: What are the Assumptions of Keynesian Economic Theory?
EQ: How is Keynesian Theory Different from Classical Theory? Classical Theory Supply-Focused (SRAS) Say s Law Economy is self-regulating Laissez-Faire Wages can go up or down Businesses will borrow & invest
More information5. Macroeconomists cannot conduct controlled experiments, such as testing various tax and expenditure policies, because:
Chapter 1 1. Macroeconomics does not try to answer the question of: A. why do some countries experience rapid growth. B. what is the rate of return on education. C. why do some countries have high rates
More informationIntroduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations slide 0 In this chapter, you will learn facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an
More informationAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate Supply Chapter 19 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department,
More informationFEEDBACK TUTORIAL LETTER
FEEDBACK TUTORIAL LETTER 2 nd SEMESTER 2017 ASSIGNMENT 1 INTERMEDIATE MACRO ECONOMICS IMA612S 1 FEEDBACK TUTORIAL LETTER ASSIGNMENT 1 SECTION A [20 marks] QUESTION 1 [20 marks, 2 marks each] Correct answer
More informationEconomics 102 Discussion Handout Week 13 Fall Introduction to Keynesian Model: Income and Expenditure. The Consumption Function
Economics 102 Discussion Handout Week 13 Fall 2017 Introduction to Keynesian Model: Income and Expenditure The Consumption Function The consumption function is an equation which describes how a household
More informationPool Canvas. Question 1 Multiple Choice 1 points Modify Remove. Question 2 Multiple Choice 1 points Modify Remove
Page 1 of 10 TEST BANK (ACCT3321_201_1220) > CONTROL PANEL > POOL MANAGER > POOL CANVAS Pool Canvas Add, modify, and remove questions. Select a question type from the Add drop-down list and click Go to
More informationGRAPHS IN ECONOMICS. Appendix. Key Concepts. Graphing Data
Appendix GRAPHS IN ECONOMICS Key Concepts Graphing Data Graphs represent quantity as a distance on a line. On a graph, the horizontal scale line is the x-axis, the vertical scale line is the y-axis, and
More informationThis is The AA-DD Model, chapter 20 from the book Policy and Theory of International Economics (index.html) (v. 1.0).
This is The AA-DD Model, chapter 20 from the book Policy and Theory of International Economics (index.html) (v. 1.0). This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/
More informationName Date Per Part 1: Aggregate Demand
Name Date Per Part 1: Aggregate Demand 1. Aggregate means. When we use aggregates, we combine. Aggregate Demand is all the goods and services ( ) that buyers are willing and able to purchase at different
More informationPrinciples of Macroeconomics Prof. Yamin Ahmad ECON 202 Spring 2007
Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Spring 2007 Midterm Exam II Name Id # Instructions: There are two parts to this midterm. Part A consists of multiple choice questions. Please mark
More informationName Date Per. Part 1: Aggregate Demand
Name Date Per Part 1: Aggregate Demand 1. Aggregate means. When we use aggregates, we combine. Aggregate Demand is all the goods and services ( ) that buyers are willing and able to purchase at different
More informationAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate Supply Aggregate Demand and Aggregate Supply The Learning Objectives in this presentation are covered in Chapter 20: Aggregate Demand and Aggregate Supply LEARNING OBJECTIVES
More informationChapter 23. Aggregate Supply and Aggregate Demand in the Short Run. In this chapter you will learn to. The Demand Side of the Economy
Chapter 23 Aggregate Supply and Aggregate Demand in the Short Run In this chapter you will learn to 1. Explain why an exogenous change in the price level shifts the AE curve and changes the equilibrium
More informationLecture 12: Economic Fluctuations. Rob Godby University of Wyoming
Lecture 12: Economic Fluctuations Rob Godby University of Wyoming Short-Run Economic Fluctuations Economic activity fluctuates from year to year. In some years, the production of goods and services rises.
More informationPart2 Multiple Choice Practice Qs
Part2 Multiple Choice Practice Qs 1. The Keynesian cross shows: A) determination of equilibrium income and the interest rate in the short run. B) determination of equilibrium income and the interest rate
More informationAggregate to add up, aggregation usually implies that the things being added up are similar, but not exactly identical
Macro Short-Run AS/AD Model Essentials Up to this point, our discussions of unemployment, inflation, output, and income have revolved around how we measure these indicators of economic performance. Now
More informationophillips Curve Multiple Choice Identify the choice that best completes the statement or answers the question.
ophillips Curve Multiple Choice Identify the choice that best completes the statement or answers the question. 1. If the natural rate of unemployment is 5%, and the actual rate of unemployment is 4%: A.
More informationHow to Graph Short-Run Phillips Curves
How to Graph Short-Run Phillips Curves Image Source: Wikimedia Commons Welcome to the AP Macroeconomics crash course on graphing the Short Run Phillips Curve (SRPC)! What is the Phillips Curve? The Phillips
More informationTest Yourself: Monetary Policy
Test Yourself: Monetary Policy The improvement of understanding is for two ends: first, our own increase of knowledge; second, to enable us to deliver that knowledge to others. John Locke What is the transaction
More informationAggregate Supply and Aggregate Demand
Aggregate Supply and Aggregate Demand ECO 301: Money and Banking 1 1.1 Goals Goals Specific Goals Be able to explain GDP fluctuations when the price level is also flexible. Explain how real GDP and the
More informationAGGREGATE SUPPLY, AGGREGATE DEMAND, AND INFLATION: PUTTING IT ALL TOGETHER Macroeconomics in Context (Goodwin, et al.)
Chapter 13 AGGREGATE SUPPLY, AGGREGATE DEMAND, AND INFLATION: PUTTING IT ALL TOGETHER Macroeconomics in Context (Goodwin, et al.) Chapter Overview This chapter introduces you to the "Aggregate Supply /Aggregate
More informationPrinciple of Macroeconomics, Summer B Practice Exam
Principle of Macroeconomics, Summer B 2017 Practice Exam 1) If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is $8.3 billion, the growth rate of real GDP between
More informationEcon 102 Discussion Section 8 (Chapter 12, 13) March 20, 2015
Econ 102 Discussion Section 8 (Chapter 12, 13) March 20, 2015 The Multiplier and Shifting the Aggregate Expenditures Function The multiplier effect describes how changes in autonomous expenditures lead
More informationChapter 9 Introduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in the
More informationArchimedean Upper Conservatory Economics, October 2016
Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to: A. the proportion of consumer spending as a function of
More informationThe text was adapted by The Saylor Foundation under the CC BY-NC-SA without attribution as requested by the works original creator or licensee
the CC BY-NC-SA without attribution as requested by the works original creator or licensee 1 of 19 Chapter 21 IS-LM C H A P T E R O B J E C T I V E S By the end of this chapter, students should be able
More informationKeynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices.
Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices. Historical background: The Keynesian Theory was proposed to show what could be done to shorten
More informationAggregate Demand and Aggregate Supply. Chapter Objectives. AD AS Model
10 Demand and Supply 10-1 Chapter Objectives Demand and the Factors That Cause it to Change. Supply and the Factors That Cause it to Change. How AD and AS Determine an Economy s and the Level of Real GDP.
More informationII. Determinants of Asset Demand. Figure 1
University of California, Merced EC 121-Money and Banking Chapter 5 Lecture otes Professor Jason Lee I. Introduction Figure 1 shows the interest rates for 3 month treasury bills. As evidenced by the figure,
More informationTextbook Media Press. CH 27 Taylor: Principles of Economics 3e 1
CH 27 Taylor: Principles of Economics 3e 1 The Building Blocks of Keynesian Analysis Keynesian economics is based on two main ideas: a) aggregate demand is more likely than aggregate supply to be the primary
More informationSticky Wages and Prices: Aggregate Expenditure and the Multiplier. 5Topic
Sticky Wages and Prices: Aggregate Expenditure and the Multiplier 5Topic Questioning the Classical Position and the Self-Regulating Economy John Maynard Keynes, an English economist, changed how many economists
More informationMankiw Chapter 10. Introduction to Economic Fluctuations. Introduction to Economic Fluctuations CHAPTER 10
Mankiw Chapter 10 0 IN THIS CHAPTER, WE WILL COVER: facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in
More informationThis is IS-LM, chapter 21 from the book Finance, Banking, and Money (index.html) (v. 1.1).
This is IS-LM, chapter 21 from the book Finance, Banking, and Money (index.html) (v. 1.1). This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/ 3.0/)
More information3. Explain what the APS tells us about people s spending and saving habits.
National Income and Price Determination Reading Guide Chapters 9, 10 and 11 Chapter 9: Building the Aggregate Expenditures Model Objective... 1. Explain how the consumption schedule helps us find equilibrium
More informationECO LECTURE TWENTY-FOUR 1 OKAY. WELL, WE WANT TO CONTINUE OUR DISCUSSION THAT WE HAD
ECO 155 750 LECTURE TWENTY-FOUR 1 OKAY. WELL, WE WANT TO CONTINUE OUR DISCUSSION THAT WE HAD STARTED LAST TIME. WE SHOULD FINISH THAT UP TODAY. WE WANT TO TALK ABOUT THE ECONOMY'S LONG-RUN EQUILIBRIUM
More informationAP Macroeconomics Unit 5 & 6 Review Session
AP Macroeconomics Unit 5 & 6 Review Session Stabilization Policies 1. Use the AD-AS model to answer this question. The economy of Macroland is initially in long-run equilibrium. Then the central bank of
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand
Chapter 32 The Influence of Monetary and Fiscal Policy on Aggregate Demand Test B 1. Of the effects that help explain why the U.S. aggregate demand curve slopes downward the a. wealth effect is most important
More informationThis is IS-LM, chapter 21 from the book Finance, Banking, and Money (index.html) (v. 2.0).
This is IS-LM, chapter 21 from the book Finance, Banking, and Money (index.html) (v. 2.0). This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/ 3.0/)
More informationCosumnes River College Principles of Macroeconomics Problem Set 6 Due April 3, 2017
Spring 2017 Cosumnes River College Principles of Macroeconomics Problem Set 6 Due April 3, 2017 Name: Instructions: Write the answers clearly and concisely on these sheets in the spaces provided. Do not
More informationShanghai Livingston American School Quarterly / Trimester Plan 2
Shanghai Livingston American School Quarterly / Trimester Plan 2 Concept / Topic To Teach: Specific Objectives: Week 1 Week 2 Week 3 Week 4 Unit 3 Module 16 INCOME AND EXPENDITURES Comprehend the nature
More informationProblem Set #2. Intermediate Macroeconomics 101 Due 20/8/12
Problem Set #2 Intermediate Macroeconomics 101 Due 20/8/12 Question 1. (Ch3. Q9) The paradox of saving revisited You should be able to complete this question without doing any algebra, although you may
More informationChapter 13: Aggregate Demand and Aggregate Supply Analysis
Chapter 13: Aggregate Demand and Aggregate Supply Analysis Yulei Luo SEF of HKU March 20, 2016 Learning Objectives 1. Identify the determinants of aggregate demand and distinguish between a movement along
More informationNotes 6: Examples in Action - The 1990 Recession, the 1974 Recession and the Expansion of the Late 1990s
Notes 6: Examples in Action - The 1990 Recession, the 1974 Recession and the Expansion of the Late 1990s Example 1: The 1990 Recession As we saw in class consumer confidence is a good predictor of household
More informationa. Fill in the following table (you will need to expand it from the truncated form provided here). Round all your answers to the nearest hundredth.
Economics 102 Summer 2015 Answers to Homework #4 Due Monday, July 13, 2015 Directions: The homework will be collected in a box before the lecture. Please place your name on top of the homework (legibly).
More informationBoğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS FINAL , Saturday 10:00 TYPE A
NAME: NO: SECTION: Boğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS FINAL 21.05.2016, Saturday 10:00 TYPE A Turn off your cell phone and put it away. During
More informationPutting the Economy Together
Putting the Economy Together Topic 6 1 Goals of Topic 6 Today we will lay down the first layer of analysis of an aggregate macro model. Derivation and study of the IS-LM Equilibrium. The Goods and the
More informationIntroduction. Over the long run, real GDP grows about 3% per year on average.
Introduction Over the long run, real GDP grows about 3% per year on average. In the short run, GDP fluctuates around its trend. Recessions: periods of falling real incomes and rising unemployment Depressions:
More informationAn Excel Modeling Practice Problem
An Excel Modeling Practice Problem Excel Review Excel 97 1999-2000 The Padgett s Widgets Problem Market research by Padgett s Widget Company has revealed that the demand for its products varies with the
More informationTextbook Media Press. CH 28 Taylor: Principles of Economics 3e 1
CH 28 Taylor: Principles of Economics 3e 1 The Building Blocks of Neoclassical Analysis Neoclassical economics argues that in the long run, the economy will adjust back to its potential GDP level of output
More informationKeynes Law and Say s Law in the AD/AS Model
Keynes Law and Say s Law in the AD/AS Model By: OpenStaxCollege The AD/AS model can be used to illustrate both Say s law that supply creates its own demand and Keynes law that demand creates its own supply.
More informationchapter: Aggregate Demand and Aggregate Supply Aggregate Demand The Aggregate Demand Curve The Aggregate Demand Curve
>> chapter: 1 Demand and Supply Krugman/Wells WHAT YOU WILL LEARN IN THIS CHAPTER " How the demand curve illustrates the relationship between the and the quantity of output demanded in the economy " How
More informationAggregate means to add up, aggregation usually implies that the things being added up are similar, but not exactly identical
Macro Short Run AS & Model Essentials Up to this point, our discussions of unemployment, inflation, output, and income have revolved around how we measure theses indicators of economic performance. Now
More informationLaugher Curve. Demand. Demand. The Law of Demand. The Law of Demand
Laugher Curve emand Q. What do you get when you cross the Godfather with an economist?. n offer you can't understand. Chapter 3-3 emand emand means the willingness and capacity to pay. Prices are the tools
More informationIntroduction to Economic Fluctuations. Instructor: Dmytro Hryshko
Introduction to Economic Fluctuations Instructor: Dmytro Hryshko 1 / 32 Outline facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction
More informationLesson 11 Aggregate demand and Aggregate Supply
Lesson 11 Aggregate demand and Aggregate Supply Henan University of Technology Sino-British College Transfer Abroad Undergraduate Programme 0 In this lesson, look for the answers to these questions: What
More informationECNS Fall 2009 Practice Examination Opportunity
ECNS 202 -- Fall 2009 Practice Examination Opportunity Mark the answer on the provided scantron sheet using a #2 lead pencil. Erase completely. I am not responsible for poorly marked or poorly erased asnwers.
More informationa) Calculate the value of government savings (Sg). Is the government running a budget deficit or a budget surplus? Show how you got your answer.
Economics 102 Spring 2018 Answers to Homework #5 Due 5/3/2018 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework
More informationMacroeconomic Analysis Econ 6022
1 / 36 Macroeconomic Analysis Econ 6022 Lecture 10 Fall, 2011 2 / 36 Overview The essence of the Keynesian Theory - Real-Wage Rigidity - Price Stickiness Justification of these two key assumptions Monetary
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Final Exam Practice Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In an economy with no government or foreign sector, it is always true
More informationAggregate Demand and Aggregate Supply
Chapter 31 Aggregate Demand and Aggregate Supply Test B 1. Recession refers principally to a. below average real GDP growth. b. negative real GDP growth. c. below average inflation. d. negative inflation.
More informationChapter 12 Consumption, Real GDP, and the Multiplier
Chapter 12 Consumption, Real GDP, and the Multiplier Learning Objectives After you have studied this chapter, you should be able to 1. define saving, savings, consumption, dissaving, autonomous consumption,
More information13 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Chapter. Key Concepts
Chapter 3 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Key Concepts Fixed Prices and Expenditure Plans In the very short run, firms do not change their prices and they sell the amount that is demanded.
More informationEconomics 102 Summer 2014 Answers to Homework #5 Due June 21, 2017
Economics 102 Summer 2014 Answers to Homework #5 Due June 21, 2017 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the
More informationASX Schools Sharemarket Game
The ASX charts When you spend time discovering a company s story and looking at company numbers you are using what is called fundamental analysis. Many people who invest in the sharemarket use fundamental
More informationKOÇ UNIVERSITY ECON 202 Macroeconomics Fall Problem Set VI C = (Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G.
KOÇ UNIVERSITY ECON 202 Macroeconomics Fall 2007 Problem Set VI 1. Consider the following model of an economy: C = 20 + 0.75(Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G. (a) What is the value of the MPC
More informationChapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis
Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Cheng Chen SEF of HKU November 2, 2017 Chen, C. (SEF of HKU) ECON2102/2220: Intermediate Macroeconomics November 2, 2017
More informationDisposable income (in billions)
Section 4 version 2 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. An increase in the MPC: A. increases the multiplier. B. shifts the autonomous investment
More informationINFLATION, JOBS, AND THE BUSINESS CYCLE*
Chapt er 12 INFLATION, JOBS, AND THE BUSINESS CYCLE* Key Concepts Inflation Cycles1 In the long run inflation occurs because the quantity of money grows faster than potential GDP. Inflation can start as
More informationAnswers to Questions: Chapter 8
Answers to Questions in Textbook 1 Answers to Questions: Chapter 8 1. In microeconomics, the demand curve shows the various quantities of a specific product that a consumer wants at various prices for
More informationECON 102 Tutorial 3. TA: Iain Snoddy 18 May Vancouver School of Economics
ECON 102 Tutorial 3 TA: Iain Snoddy 18 May 2015 Vancouver School of Economics Questions Questions 1-3 set-up Y C I G X M 1.00 1.00 0.5 0.7 0.45 0.15 2.00 1.65 0.5 0.7 0.45 0.30 3.00 2.30 0.5 0.7 0.45 0.45
More information** Review ** For Test 3. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
** Review ** For Test 3 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following leads to an increase in the interest rate? 1) A)
More informationIf a model were to predict that prices and money are inversely related, that prediction would be evidence against that model.
The Classical Model This lecture will begin by discussing macroeconomic models in general. This material is not covered in Froyen. We will then develop and discuss the Classical Model. Students should
More informationECON2010 test 2 study guide
ECON2010 test 2 study guide 1) In a closed economy public saving plus private saving is equal to a The budget deficit b The budget surplus c Taxes minus transfers d Investment 2) Which of the following
More informationTWO VIEWS OF THE ECONOMY
TWO VIEWS OF THE ECONOMY Macroeconomics is the study of economics from an overall point of view. Instead of looking so much at individual people and businesses and their economic decisions, macroeconomics
More informationUnit 3: Aggregate Demand and Supply and Fiscal Policy
Unit 3: Aggregate Demand and Supply and Fiscal Policy 1 Aggregate Demand 2 What is Aggregate Demand? Aggregate means added all together. When we use aggregates we combine all prices and all quantities.
More informationIntroduction to Economic Fluctuations
CHAPTER 10 Introduction to Economic Fluctuations Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, OU WILL LEARN: facts about the business cycle how the short
More informationINSTRUCTIONS: READ CAREFULLY!!!
Form 1 Name: Section No.: UM ID No.: GSI: Form : Economics 102 Introduction to Macroeconomics Prof. Alan Deardorff Final Exam April 25, 2002 INSTRUCTIONS: READ CAREFULLY!!! 1. Please do not open the exam
More informationArchimedean Upper Conservatory Economics, November 2016 Quiz, Unit VI, Stabilization Policies
Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The federal budget tends to move toward _ as the economy. A. deficit; contracts B. deficit; expands C.
More informationAggregate Demand and Aggregate Supply
C H A P T E R 33 Aggregate Demand and Aggregate Supply Economics P R I N C I P L E S O F N. Gregory Mankiw Premium PowerPoint Slides by Ron Cronovich 2009 South-Western, a part of Cengage Learning, all
More informationMacroeconomics. Aggregate Demand and Aggregate Supply. Introduction. In this chapter, look for the answers to these questions: N.
C H A T E R 15 Aggregate Demand and Aggregate Supply B R I E F R I N C I L E S O F Macroeconomics N. Gregory Mankiw remium oweroint Slides by Ron Cronovich 2010 South-Western, a part of Cengage Learning,
More informationECON 3010 Intermediate Macroeconomics Chapter 10
ECON 3010 Intermediate Macroeconomics Chapter 10 Introduction to Economic Fluctuations Facts about the business cycle GDP growth averages 3 3.5 percent per year C (consumption) and I (Investment) fluctuate
More informationAll the graphs (and some other stuff) you need to know for Macro
All the graphs (and some other stuff) you need to know for Macro IGNORE THE LAFFER CURVE! Correctly drawing and labeling graphs is critical in answering the free response questions (FRQs). For an interactive
More informationInflation and the Phillips Curve
CHAPTER 33 Inflation and the Phillips Curve The first few months or years of inflation, like the first few drinks, seem just fine. Everyone has more money to spend and prices aren t rising quite as fast
More informationMidsummer Examinations 2011
Midsummer Examinations 2011 No. of Pages: 7 No. of Questions: 37 Subject ECONOMICS Title of Paper MACROECONOMICS Time Allowed Two Hours (2 Hours) Instructions to candidates This paper is in two sections.
More informationThis is IS-LM in Action, chapter 22 from the book Finance, Banking, and Money (index.html) (v. 1.0).
This is IS-LM in Action, chapter 22 from the book Finance, Banking, and Money (index.html) (v. 1.0). This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/
More informationMidterm Examination Number 1 February 19, 1996
Economics 200 Macroeconomic Theory Midterm Examination Number 1 February 19, 1996 You have 1 hour to complete this exam. Answer any four questions you wish. 1. Suppose that an increase in consumer confidence
More information