Please answer all parts: 1. As more people in India have access to higher educat

Question

Please answer all parts:

1. As more people in India have access to higher education, explain how potential GDP and aggregate supply will change in the long run.

2. Explain the effect of each of the following events on the quantity of U.S. real GDP demanded and the demand for U.S. real GDP:

-The world economy goes into a strong expansion.

-The U.S. price level rises.

-Congress raises income taxes.

3. The United States is at full employment when the Fed cuts the quantity of money, other things remaining the same. Explain the effect of the cut in the quantity of money on aggregate demand in the short run.

Explanation / Answer

1. When more people in India have excess to higher education, the labor force of the country will be educated and therefore, they will contribute to the economy of the country more. This will increase the GDP and aggregate supply of the country in long run.

2.(a) U.S. export will increase as the world economy goes inot a strong expansion. As a result of this, the aggregate demand of U.S. will increase and the demand curve of U.S. will shift to the right.

(b) The rise in U.S. prices will decrease the quantity of GDP demanded. There will be a upward movement along the aggregate demand curve.

(c) If congress raises the taxes than the aggregate demand would decrease and the aggregate demand curve will shift leftward.Because people will limit the purchases of the commodities as the taxes increases.

3. The A cut in quantity of money by the government will directly decrease the aggregate demand curve. consumers will have less money to consume and invest because of the increase in the taxes which indirectly reduces the aggregate demand curve in the short run.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.