Econ Quiz 11b - StudentzNirav Patel Instructor: Alpha...

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Unformatted text preview: StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition 1. The economy is depicted in the graph to the right 3. Suppose, there are fewer regulatory impediments to busine LRAS LRAS 1 The short run aggregate supply curve shift: SRAS out while the long run aggregate supply curve shifts in. SRASI 1' Both the short run and long run aggregate supply curves shift outward. Price level The short run aggregate supply curve shift: inward while the long run aggregate supplj curve shifts outward. Both the short and long run aggregate supply curves shift inward. . 0 4 8 1 16 b. Complete the diagram Real GDP ($ mil ions) 1.) Using the line drawing tool, draw the new long—run aggregate supply curve representing this shock. Label it as LRASI. 2.) Using the 3—point curved line drawing tool, draw the new SRAS representing this shock. Lab it 'SRASl'. Note: you are not prompted for labels, you hav used the wrong drawing tool. E YOU ANSWERED: nothing Page I StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 156 Updated Edition 1. (cont) LRAS SRAS T) E .3 E O 4 8 12 16 20 Real GDP (‘5 trillions) Page 2 Student: Nirav Patel Submitted: 11/24/10 5:31pm Instructor: Alpha Kaikai Price level 180 160 140 120 100 -10:00 Book: Miller: Economics Today lSe Updated Edition 2, Suppose that the macroeconomy is depicted by tl table below. Short-run Long-run Aggregate aggregate aggregate Price demand supply supply level ($ trillions) ($ trillions) ($ trillions) 80 13 l 9 100 l l 7 9 120 9 9 9 160 5 1 1 9 1.) Using the line drawing tool, draw the aggreatr demand curve and label it 'AD'. 2.) Using the line drawing tool, draw the long rui aggregate supply and label it 'LRAS'. 3.) Using the 4-p0int curved line drawing tool, draw the short run aggregate supply curve and label this curve 'SRAS'. 4.) Using the point drawing tool, indicate the equilibrium price level and the quilibrium level 0 real GDP and label it 'E'. Note: if you are not prompted for labels, you hav used the wrong drawing tool. E 180 160 140 120 100 Price level 80 60 Page 3 80 60 Assignment: Chapter 1 1-8 Course: CCBC ECON 201- MWF 9:05 LRAS S RAS 6 8 1 0 1 2 14 Real GDP ($ trillions) 16 ’18 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition (cont) 0 2 4 6 8 1o 12 14 16 18 20 3, Suppose that the economy is depicted in the graph. LRAS SRAS Using the 3-point curved line drawing tool, SRASI depict the scenario in which the economy experiences cost-push inflation by correctly shifting the short-run aggregate supply curve. Label it 'SRASI'. Note: if you are not prompted for a label, you Price level have used the wrong drawing tool. E AD Real GDP ($ trillions) LRAS SRAS Price level AD YOU ANSWERED: Real GDP (33 trillions) Page 4 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition 4. Suppose that the economy is depicted in the graph to the right. 160 a. The current equilibrium price level and output 150 level respectively are: 80V and 35 12V trillion. 140 LRAS (Enter your response as a whole number.) 130 SRAS 120 b. Using the line drawing tool, show a change in aggregate demand that leads to an inflationary gap. Use the line drawing tool and label this new Price level _\ O 0 line 'ADI'. 90 80 ................................... .. Note: ifyou are not prompted for a label, you 70 have used the wrong drawing tool. E 60 0 2 4 6 8 1 0 1 2 14 1 6 1 8 Real GDP ($ trillions) YOU ANSWERED: nothing nothing LRAS SRAS Price level _x O O 0 2 4 6 8 1O 12 14 16 18 20 Real GDP (33 trillions) Page 5 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition 5. The Keynesian Model of the macroeconomy argues that prices are sticky due to labor contracts and unions. a. The existence of sticky prices causes the V . short run aggregate supply to be horizontal. b. Suppose that the aggregate demand changes due to an increase in the amount of money in circulation. SRAS Price level Using the line drawing tool, draw the new aggregate demand curve. Label it AD 1. AI Note: you are not prompted for a label, you ADO have usedthe wrongdrawing tool. E 1 2 3 4 5 6 7 8 9 Real GDP (S, trillions) YOU ANSWERED: nothing SRAS Price level AD0 1 2 3 4 5 6 7 8 9 1 0 Real GDP ($, trillions) Page 6 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition 6, Consider the assumptions of the Classical Model. 150 LRAS . i _ 140 l.) Uszng the line drawzng tool, draw the long—run aggregate supply curve such that real 130 GDP is $10 trillion. 120 2.) Using the line drawing tool, draw the T) 110 aggregate demand curve. Properly label your E 100 line. is 5: 90 Note: you are not prompted for a label, you 80 have used the wrong drawing tool. E 70 . 60 AD Suppose that aggregate demand were to morease due to a weaker dollar. Which of the following 50 1d b h 1 9 0 2 4 6 8 10 12 14 W0” 6 t 6 ms” t. Real GDP ($ trillions) An increase in real GDP and inflation. An increase in real GDP and deflation. *3 Inflation only. Deflation only. 150 140 130 120 T) 110 E 8 100 i 90 80 7O 6O 50 0 2 4 6 8 10 12 14 16 ‘fnT T A \To“ 7131313“. Real GDP ($ trillions) Page 7 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition 6 mm ANbWEKEL): '“‘ " (cont) nothing 7. Demand—pull inflation arises due to: a decrease in the aggregate demand. *3 a depreciation of the US$. a higher price level. a decrease in the short run aggregate supply. Which of the following would create demand-pull inflation? Increased international trade barriers. An increase in the real rate of interest. 1' An increase in household income. A decrease in wages paid to workers. YOU ANSWERED: nothing nothing Page 8 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 —10:00 Book: Miller: Economics Today 15e Updated Edition 8, Suppose that an economy begins in equilibrium at E1 as depicted in the graph to the right. 140 130 LRAS Assume that the economy follows the Classical Model assumptions. 120 a. Using the line drawing [00], draw a new short 11o run aggregate demand (AD) curve reflecting E E1 a decrease in the amount Of money in E 100 . . . . . . . . . . . . . . . . . . . . . . . . . .. circulation. Properly label this line. E 90 Note: ifyou are not prompted for a label, you 80 AD have used the wrong drawing tool. E 70 A]: b. Due to the change in the AD curve the immediate effect is that the price level 0 2 4 6 8 10 12 14 Real GDP ($ trillions) . ‘ remains constant and the real GDP V decreases c. Now that the macro economy is in a disequilibrium, what happens in the labor market? Wages increase to promote production. The government imposes a minimum wage to support the economy. Workers unionize to retain higher wages, \ moves the economy further from full empl W :E 7"! Unemployment increases, which decreases wages. (1. As the wage decreases, the: Page 9 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 —10:00 Book: Miller: Economics Today 15e Updated Edition 8. demand for labor decreases, deepening (cont) the recession. 7"? quantity demanded of labor increases, while the law of supply reduces the number of workers seeking jobs. demand for labor increases and production increases back to the full employment level. supply of labor increases. 140 130 LRAS 120 110 100 ............................ .. Price level 90 80 AD 70 0 2 4 6 8 1 0 1 2 14 1 6 Real GDP ($ trillions) nothing nothing nothing nothing Page 10 Student: Nirav Patel Submitted: 11/24/10 5:31pm Instructor: Alpha Kaikai Course: CCBC ECON 201- MWF 9:05 -10:00 Assignment: Chapter 1 1-8 Book: Miller: Economics Today 15e Updated Edition In the Modern Keynesian model the short run aggregate supply curve slopes upward. How could one explain the shape of the upward sloping short run aggregate supply curve by only focusing on the capital input? The firm takes workers off the assembly line to increase worker training time. Increase maintenance of machines to assure proper working order. Existing machinery can be used longer hours. New machinery can be added. How could one explain the shape of the upward sloping short run aggregate supply curve by only focusing on profits? Firms are able to earn profit as long as the price level and wage rates increase by the same rates. Higher prices mean that workers need to work longer to maintain their current purchasing power, so thus production increases. Firms are able to earn higher profits as long as the price level increases and the nominal wage rate remains constant. Firms earn more profit as the price level decreases since consumers can afford more of their product then. YOU ANSWERED: nothing nothing Page 1 l StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition 10, a. Complete the following diagram. LRAS 1.) Using the line drawing tool, draw a Long-Run Aggregate Supply for any value of GDP greater than $2 trillion. Label it 'LRAS'. SRAS 2.) Using the 3-point curved line drawing tool, draw a SRAS curve. Label it 'SRAS'. Price level Note: you are not prompted for labels, you have used the wrong drawing tool. E b. Which of the following factors will shift the short—run aggregate supply curve but not the long—run AS? 1* . . . 0 2 4 6 8 10 12 14 16 18 All economy w1de Increase In wages. Rea] GDP ($ trillions) A decrease in capital A decrease in labor productivity A permanent decrease in oil production. c. If petroleum prices increase temporarily the short run aggregate supply‘ curve would shift to the left ‘. Price level Page 12 StudentzNirav Patel Instructor: Alpha Kaikai Assignment: Chapter 1 1-8 Submitted: 11/24/10 5:31pm Course: CCBC ECON 201- MWF 9:05 -10:00 Book: Miller: Economics Today 15e Updated Edition 10. (cont) 0 2 4 6 8 10 12 14 16 18 20 YOU ANSWERED: Real GDP (15 trillions) nothing nothing nothing 1]. An important difference between the Classical model and the Keynesian model is that the: a. Keynesians believe that the aggregate supply curve is horizontal in the short run‘. b. The Classical model assumes prices are flexible‘ so that the aggregate supply curve is vertical ‘ and the economy is always at full employment ‘ c. The Keynesian model indicates that the economy will find an equilibrium however the economy will not always reach full employment ‘. YOU ANSWERED: nothing nothing nothing nothing nothing Page 13 ...
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This note was uploaded on 02/09/2011 for the course ECON 201 taught by Professor Coomber during the Fall '08 term at Community College of Baltimore County.

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Econ Quiz 11b - StudentzNirav Patel Instructor: Alpha...

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