with explanation PLEASE!! Optimism Imagine that the economy is in long-run equil
ID: 1180948 • Letter: W
Question
with explanation PLEASE!!
Optimism Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. Refer to Optimism. Which curve shifts and in which direction? aggregate demand shifts right aggregate demand shifts left aggregate supply shifts right. aggregate supply shifts left. Refer to Optimism. In the short run what happens to the price level and real GDP? both the price level and real GDP rise. both the price level and real GDP fall. the price level rises and real GDP falls. the price level falls and real GDP rises. Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining? The expected price level falls. Bargains are struck for higher wages. the expected price level falls. Bargains are struck for lower wages. The expected price level rises. Bargains are struck for higher wages. The expected price level rises. Bargains are struck for lower wages. Refer to Optimism. In the long run, the change in price expectations created by optimism shifts long-run aggregate supply right. long-run aggregate supply left. short-run aggregate supply right. short-run aggregate supply left. Refer to Optimism. How is the new long-run equilibrium different from the original one? both price and real GDP are higher both price and real GDP are lower. the price level is the same and GDP is higher. the price level is higher and real GDP is the same. People choose to hold a smaller quantity of money if the interest rate rises, which causes the opportunity cost of holding money to rise. the interest rate falls, which causes the opportunity cost of holding money to rise. the interest rate rises, which causes the opportunity cost of holding money to fall. the interest rate falls, which causes the opportunity cost of holding money to fall. When the Fed sells government bonds, the reserves of the banking system increase, so the money supply increases. increase, so the money supply decreases. decrease, so the money supply increases. decrease, so the money supply decreases.Explanation / Answer
a) aggregate demand shifs right
due to optimism, the consumers spend more
a) both price level and the GDP rise
as the consumers demand more(rightward shift of the demand curve), and the suppliers are willing to sell more only at an increased price(upward sloping supple curve) as the supply curve has not yet adjusted(i.e not shifted right to bring the price back to equilibrim).
b) the expeced price level falls. bargains are struck for higher wages
as there is optimism in the economy among the workers regarding their future, workers bargain for higher wages.
a) short run aggregate supply right
in order to meet the increased demands, the supply curve shifts right. [Long run supply is always vertical and constant]
c) thprice level is the same and the GDP is higher
the rightward shift in the supply curve matches the rightward shift in the demand to keep the priec level constact while increasing the GDP
a) if interest rises, as the opportunity cost if holding the money rises
as they can save(or invest) the money to get higher return than to forego the interes with idle holding.
b) decrease so the money supply decreases
as the bonds are sold, money from the banks is received by the Fed which decreases the money available with the bank for circulation.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.