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Chapter 10: Q. cFCT (page 224)

What would happen to the South African inflation fate in future years if the AD curve were to begin shifting rightward at a more rapid pace than the LRAS curve?

Short Answer

Expert verified

Increasing anyof these components shifts the AD curve tothe correct,leading to a greater real GDP and to upward pressure onthe worth level.

Step by step solution

01

Given Information

The aggregate demand curve, or AD curve, shifts to the right because the components purchase, industry, public expenditure, and investment on minus the value importation all grow as money supply improves. As of these portions drop, its AD curve to shift back to the left.

02

Explanation

If the AD curve shifts tothe right, then the equilibrium quantity of output and also the indicant will rise. If the AD curve shifts to the left, then the equilibrium quantity of outputand so the index will fall.

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Most popular questions from this chapter

Take a look at the panel (b) of Figure 10-8. What change in the position of the aggregate demand curve could generate inflation-that is, an increase in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Federal Reserve could generate such a change in the position of the aggregate demand curve?

Identify the combined shifts in long-run aggregate supply and aggregate demand that could explain the following simultaneous occurrences,

a. An increase in equilibrium real GDP and an increase in the equilibrium price level

b. A decrease in equilibrium real GDP with no change in the equilibrium price level

c. An increase in equilibrium real GDP with no change in the equilibrium price level

d. A decrease in equilibrium real GDP and a decrease in the equilibrium price level

Suppose that there is a sudden rise in the price level. What will happen to economywide planned spending on purchases of goods and services? Why?

Consider Figure 10-4. What are the three effects of decreases in the price level, and do these generate upward or downward movements along the economy's aggregate demand curve?

Suppose that the position of a nation's long-run aggregate supply curve has not changed, but its long-run equilibrium price level has increased. Which of the following factors might account for this event?

a. A rise in the value of the domestic currency relative to other world currencies

b. An increase in the quantity of money in circulation

c. An increase in the labor force participation rate

d. A decrease in taxes

e. A rise in real incomes of countries that are key trading partners of this nation

f. Increased long-run economic growth
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