Question

Homework help please:
B. An economy where these effects (from your answer above) are strong will generally have a flatter AD curve, since changes in the price level will have a large effect on the associated level of RGDP. The second part is in comments.

Answer 1

II. There is an increasing trend of globalization in the world, part of which is manifested in credit and input markets. It could be argued that this will cause interest rates to be determined in international credit markets rather than in national credit markets, and most small, national fluctuations will have no effect. How might this change the relationship between the aggregate quantity of goods and services demanded and the price level in a nation's economy? That is, In terms of the AD/AS diagram, will the AD curve become steeper or flatter?

III. Now, consider that many people have become more sophisticated in their financial dealings. Instead of holding cash or assets such as checking or savings deposits (which are basically the same as cash), they keep their wealth in assets whose value will NOT generally change with the price level. How might this change the relationship between the aggregate quantity of goods and services demanded and the price level in an economy? That is, In terms of the AD/AS diagram, will the AD curve become steeper or flatter?

Answer 2

@bohotness

Answer 3

@ bohotness

Answer 4

@bohotness

Answer 5

which one do you think is righhT?

Answer 6

I don't know. This is not multiple choice.
Its a short answer question.

Answer 7

okay

Answer 8

http://r.search.yahoo.com/_ylt=AwrTcchqPCNV1IkAeGEnnIlQ;_ylu=X3oDMTEzbmdoYXFmBHNlYwNzcgRwb3MDMgRjb2xvA2dxMQR2dGlkA1lIUzAwNF8x/RV=2/RE=1428401386/RO=10/RU=http%3a%2f%2fquizlet.com%2f17636440%2feconomics-flash-cards%2f/RK=0/RS=pwsIglMwTj1EE4VQRMd41y_zyv4- http://r.search.yahoo.com/_ylt=AwrTcchqPCNV1IkAemEnnIlQ;_ylu=X3oDMTEzbGI5YzhrBHNlYwNzcgRwb3MDMwRjb2xvA2dxMQR2dGlkA1lIUzAwNF8x/RV=2/RE=1428401386/RO=10/RU=http%3a%2f%2fquizlet.com%2f17631492%2fecon-final-flash-cards%2f/RK=0/RS=rAYTpWZSXQQRMGWlPISGSMjGJuU-

Answer 9

looking at it :)

Answer 10

:D

Answer 11

what do you think is the answer?

Answer 12

The quizlet is not helping. Do you know the answer? Itried reading my textbook and researching, I still have no idea how to answer these two questions.

Answer 13

Please check my answers to 5.2 :

1. A typical AS curve has three parts: a flat, horizontal portion at low levels of output, a middle section with a more-or-less gentle upward slope, and a steep or vertical portion at high levels of output. Let’s consider two of these parts individually, the horizontal portion and the vertical portion.

A. Imagine that AS and AD intersect in the horizontal portion of the AS curve. Assume a technological breakthrough increases the full-employment level of RGDP and shifts the AS curve to the right. In this case, when aggregate supply increases, how does the output of the economy change? Does supply create its own demand? (5 points)

Since this is a technological breakthrough, production increases, saving people more time. When aggregate supply increases, the output increases, as when there is more demand, suppliers are making more of the good demanded and then giving that good off to the sellers. If real GDP increases, then the price level may increase, depending on the economy’s state- whether it is at, above or below full employment. If the aggregate supply increases, and if the economy is below full employment, the increases of aggregate demand increase the real GDP while the price level remains unchanged. This is part of the Keynesian view, and that states the fact that “demand “ creates its own supply.”

B. Imagine that AS and AD intersect in the horizontal portion of the AS curve. In this case, if aggregate demand increases, how does the output of the economy change? Does demand drive the economy here? (5 points)

If the aggregate demand increases, the price level will remain constant, and if the economy is in recession, then the AD must increase until the economy reaches full employment. At a higher level of real GDP, aggregate output may expand through the Keynesian range without experiencing raises of prices. Here, the real GDP is expanding, while the price level stays constant. According to my understanding of the Keynesian range, it looks like demand is pushing the economy into such state.

C. Imagine that AS and AD intersect in the vertical portion of the AS curve. In this case, if aggregate demand increases, how does the output of the economy change? Does demand drive the economy here? (5 points)
If aggregate demand increases in the classical range, the price level grows, but the increase in aggregate demand is not increasing real GDP. If the economy is at capacity, then businesses are raising their prices- they want to give fully employed resources only to the people who are willing to pay the most highest prices. The increases in aggregate demand could cause inflation.


D. Imagine that AS and AD intersect in the vertical portion of the AS curve. Assume a technological breakthrough increases the full-employment level of RGDP and shifts the AS curve to the right. In this case, when aggregate supply increases, how does the output of the economy change? Does supply create its own demand? (5 points)

If the aggregate supply curve shifts to the right, the real GDP will increase and the price level will decrease. It seems the supply is creating its own demand according to a similar graph (such as one which relates to a supply side explanation of the business cycle.

E. Which part of the AS curve is consistent with the Keynesian model, and which part of the AS curve is consistent with the classical model? (2 point)
The horizontal part of the AS curve is consistent with the Keynesian model. The Vertical part, and curve of the AS curve is consistent with the classical model.

2. Aggregate expenditure equals the sum of consumption, investment, government spending, and net exports. These are also the components of aggregate demand. The aggregate expenditure model looks at the effects of changes in demand on income (Y), assuming that the price level does not change. Likewise, in the flat or Keynesian portion of the AS curve, the price level will not change when output changes.

A. In an AE model with MPC = 0.80, the government increases spending by $100 million. What will be the increase in equilibrium Y in the Keynesian AE model? (6 points)
In order to calculate the equilibrium, I need the numbers for C + I + G + NX. Since the MPC is 0.80, the spending multiplier will be 5. If I had Y increase from zero to $1000m and then to 2,000, it looks like the marginal propensity to consume is decreasing. If I calculate, then the marginal propensity is 0.9 when Y is 1,000. When it goes to 2,000, the marginal propensity is 0.8. (I did calculations on paper)

Answer 14

@PRAETORIAN.10

Answer 15

@freegirl11112

Answer 16

ummm

Answer 17

sorry I do not know this at all

Answer 18

its ok :) I'm going to keep asking till i get someone to help.

Answer 19

@Loser66

Answer 20

@leonardo0430

Answer 21

so you want me to check your answers?

Answer 22

yes, and help with the II and III

Answer 23

so far i think its right but i am not entirely too sure

Answer 24

okay, but what about II and III?

Answer 25

not sure sorry .-.

Answer 26

@Miracrown

Answer 27

@e.mccormick