Chapter 24: Q 11. (page 601)
What impact would a decrease in the size of the labor force have on GDP and the price level according to the AD/AS model?
This will cause a negative impact overall.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
How is pressure for inflationary price increases shown in an AD/AS model?
The imaginary country of Harris Island has the
aggregate supply and aggregate demand curves as Table shows.
a. Plot the AD/AS diagram. Identify the equilibrium.
b. Would you expect unemployment in this economy to be relatively high or low?
c. Would you expect concern about inflation in this
economy to be relatively high or low?
d. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by at every price level.
Identify the new aggregate equilibrium.
e. How will the shift in AD affect the original
output, price level, and employment?
What is the neoclassical zone of the SRAS curve? How much is the output level likely to change in the neoclassical zone?
Would a shift of AD to the right tend to make the equilibrium quantity and price level higher or lower? What about a shift of AD to the left?
Table describes Santher's economy.
a. Plot the AD/AS curves and identify the equilibrium.
b. Would you expect unemployment in this
economy to be relatively high or low?
c. Would you expect prices to be a relatively large
or small concern for this economy?
d. Imagine that input prices fall and so AS shifts
to the right by units. Identify the new
equilibrium.
e. How will the shift in AS affect the original
output, price level, and employment?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
