Chapter 23: Q.14 (page 618)
What happens to inflation and output in the short run and the long run when taxes decrease?
Affectation is that condition of the frugality when the value of everything increases fleetly because of which severance and affair of the frugalitydecreases.
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During 2017, some Fed officials discussed the possibility of increasing interest rates as a way of fighting potential increases in expected inflation. If the public came to expect higher inflation rates in the future, what would be the effect on the short-run aggregate supply curve? Use an aggregate demand and supply graph to illustrate your answer.
Suppose the inflation rate remains relatively constant while output decreases and the unemployment rate increases. Using an aggregate demand and supply graph, show how this scenario is possible.
In many countries around the world, the population is aging and large segments of the population are retiring or close to retirement. What effect would this have on a country’s long-run aggregate supply curve? What will happen to aggregate output as a result?
Classify each of the following as a supply shock or a demand shock. Use a graph to show the effects on inflation and output in the short run and in the long run.
a. Financial frictions increase.
b. Households and firms become more optimistic about the economy.
c. Favorable weather produces a record crop of wheat and corn in the Midwest.
d. Auto workers go on strike for four months.
When aggregate output is below the natural rate of output, what happens to the inflation rate over time if the aggregate demand curve remains unchanged? Why?
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