Aggregate Supply and Demand Check-up LRAS SRAS AD YF Real

Aggregate Supply and Demand Check-up LRAS SRAS AD YF Real GDP LABELING: VERTICAL AXIS: PRICE LEVEL HORIZONTAL AXIS: REAL GDP LRAS: LONG-RUN AGGREGATE SUPPLY SRAS: SHORT-RUN AGGREGATE SUPPLY AD: AGGREGATE DEMAND YF: FULL EMPLOYMENT OUTPUT (GDP) P: PRICE LEVEL SHOW CHANGES/MOVEMENT USE NUMBERS (1, 2) TO INDICATE OLD AND NEW PRICE LEVELS, CURVES, AND OUTPUT LEVELS

Assume that a country’s economy is operating at full employment. Draw a correctly labeled aggregate demand and aggregate supply graph and show the economy’s current output and price level LRAS SRAS AD REAL GDP Yf

DRAW EACH OF THE FOLLOWING SCENARIOS: An economy in a “recessionary gap” in which consumer, government, investment, and/or foreign spending has decreased. An economy in an “inflationary gap” in which consumer, government, investment, and/or foreign spending has increased. An economy undergoing a NEGATIVE supply shock caused by an increase in input costs. An economy undergoing a POSITIVE supply shock caused by a decrease in input costs.

Assume that a country’s economy is operating at less than full employment. Draw a correctly labeled aggregate demand and aggregate supply graph and show the economy’s current output and price level.

Assume that the United States economy is in a severe recession with no inflation. (a) Using a correctly labeled aggregate demand and aggregate supply graph, show each of the following for the economy. (i) Full-employment output (ii) Current output level (iii) Current price level

Assume that a country’s economy is in equilibrium. (a) Using a correctly labeled aggregate demand and aggregate supply graph, show how an increase in the price of oil, an important natural resource, will affect the following in the short run. (i) Real output (ii) Price level

Assume that the economy of Xanadu is operating on the upward-sloping portion of its short-run aggregate supply curve. Assume that the government increases spending. (a) How will the increase in government expenditures affect each of the following in the short run? (i) Aggregate Demand (ii) Aggregate Supply (b) Using a correctly labeled graph of aggregate demand and aggregate supply, show the effect of the increase in government expenditures on real output and the price level.

Assume that the United States economy is operating at 8.1% unemployment. Draw a correctly labeled aggregate demand and aggregate supply graph and show the economy’s current output and price level. To combat the high rate of unemployment, the Federal Reserve announces it will purchase 85 billion a month of mortgage bonds from banks. Show how the Fed’s action will affect your aggregate demand and supply graph.