terrichichester-BU204-unit6-homework - HOMEWORK - UNIT 6...

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HOMEWORK - UNIT 6 AGGREGATE SUPPLY AND AGGREGATE DEMAND Chapter 10: Problems 1, 4, 10, and 13 on pages 266-267 Chapter 10 / AGGREGATE SUPPLY AND AGGREGATE DEMAND /26 1. Your study partner is confused by the upward-sloping short-run aggregate supply curve and the vertical long-run aggregate supply curve. How would you explain why these slopes differ? The vertical long run aggregate supply curve depicts the potential output of all of the sectors in the economy over the long run. The upward sloping short run aggregate supply curve will shift according to inflationary and recessionary gaps. When the short run supply and demand curves intersects with the long run aggregate supply the market is at equilibrium. All of these curves would have to intersect at one point to have an equilibrium economy. /26 4. A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners even though the U.S. aggregate price level stays the same. As a result, foreigners demand more American aggregate output. Your study partner says that this represents a movement down the aggregate demand curve because foreigners are demanding more in response to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve. Who is right? Explain. Aggregate demand is the total output demanded by all sectors in the economy and
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This note was uploaded on 11/14/2011 for the course BU 204 204 taught by Professor Lyncheski during the Spring '11 term at Kaplan University.

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terrichichester-BU204-unit6-homework - HOMEWORK - UNIT 6...

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