This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Explain how the static aggregate demand and aggregate supply model gives us misleading results about ... (Read 71 times)

nummyann

  • Hero Member
  • *****
  • Posts: 576
on: Jun 29, 2018
Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level, particularly with respect to decreases in aggregate demand.
 
  Describe how the aggregate demand curve is different in the dynamic model as compared to the static model. Describe how potential GDP is different in the dynamic model as compared to the static model.

Question 2

Refer to Table 4-4. Suppose that the quantity of labor supplied increases by 40,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?
 
  A) W = 9.50; Q = 420,000 B) W = 9.00; Q = 410,000
  C) W = 8.50; Q = 400,000 D) W = 8.00; Q = 390,000


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

InfiniteSteez

  • Sr. Member
  • ****
  • Posts: 340
Reply #1 on: Jun 29, 2018
Answer to Question 1

The static model incorrectly predicts that a recession caused by a shift to the left in the aggregate demand curve will cause the price level to fall. This has not happened for an entire year since the 1930s. The misleading results stem from one assumption of the static model: the economy does not experience continuing inflation. The dynamic model changes this by assuming instead that the aggregate demand curve will shift to the right during most years. Even if demand growth slows, the price level rises.
Also in the dynamic model, potential GDP is constantly growing. If the aggregate demand curve shifts to the right by less than the shift in the long-run aggregate supply curve, then equilibrium GDP falls below potential GDP, but the price level is still rising.

Answer to Question 2

D


nummyann

  • Member
  • Posts: 576
Reply 2 on: Jun 29, 2018
Wow, this really help

jamesnevil303

  • Member
  • Posts: 337
Reply 3 on: Yesterday
Great answer, keep it coming :)

« previous next »
 

Did you know?

Human neurons are so small that they require a microscope in order to be seen. However, some neurons can be up to 3 feet long, such as those that extend from the spinal cord to the toes.

Did you know?

Approximately 25% of all reported medication errors result from some kind of name confusion.

Did you know?

The top 10 most important tips that will help you grow old gracefully include (1) quit smoking, (2) keep your weight down, (3) take supplements, (4) skip a meal each day or fast 1 day per week, (5) get a pet, (6) get medical help for chronic pain, (7) walk regularly, (8) reduce arguments, (9) put live plants in your living space, and (10) do some weight training.

Did you know?

Every flu season is different, and even healthy people can get extremely sick from the flu, as well as spread it to others. The flu season can begin as early as October and last as late as May. Every person over six months of age should get an annual flu vaccine. The vaccine cannot cause you to get influenza, but in some seasons, may not be completely able to prevent you from acquiring influenza due to changes in causative viruses. The viruses in the flu shot are killed—there is no way they can give you the flu. Minor side effects include soreness, redness, or swelling where the shot was given. It is possible to develop a slight fever, and body aches, but these are simply signs that the body is responding to the vaccine and making itself ready to fight off the influenza virus should you come in contact with it.

Did you know?

Most strokes are caused when blood clots move to a blood vessel in the brain and block blood flow to that area. Thrombolytic therapy can be used to dissolve the clot quickly. If given within 3 hours of the first stroke symptoms, this therapy can help limit stroke damage and disability.

Fluid-mosaic model of membrane structure Fluid-mosaic model of membrane structure
Examples of the results of sexual selection, a type of natural selection. Examples of the results of sexual selection, a type of natural selection.
Eye Model Eye Model
Charles and Ray Eames, Side Chair, Model DCM. Charles and Ray Eames, Side Chair, Model DCM.
Schematic of a mitochondrion and Computer model generated from electron tomograms of a mitochondrion Schematic of a mitochondrion and Computer model generated from electron tomograms of a mitochondrion
The expected results of two generations of semiconservative replication The expected results of two generations of semiconservative replication
Video: Electromagnetic Spectrum, Chlorophyll and Pigment & Light

For a complete list of videos, visit our video library