Describe economic terms and concepts in question. * Describe your reasoning leading from concepts in...

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Describe economic terms and concepts in question. * Describe your reasoning leading from concepts in question to the final answer. *Write full sentences and use double spacing between paragraphs. * Place copied sentences in quotation marks and list source materials used to arrive at your answers. * Edit your work for sentence structure, spelling and appropriate formatting of paragraphs.
	
Document Preview: Part 1 instructions:* Describe economic terms and concepts in question.* Describe your reasoning leading from concepts in question to the final answer.*Write full sentences and use double spacing between paragraphs.* Place copied sentences in quotation marks and list source materials used to arrive at your answers.* Edit your work for sentence structure, spelling and appropriate formatting of paragraphs.Your work should consist of at least 3 separate sections of text:  1) description of economic terms and concepts, 2) your reasoning and 3) concluding paragraph which states the final  answer.Part 1 problem 1:Refer to the table below. Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. By what percentage will the price level increase? Will this inflation be demand-pull inflation or will it be cost-push inflation? If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?Real Output Demanded (billions)Price Level (Index Number)Real Output Supplied (billions)$506108$5135081045125101005105129650751492502Part 1 problem 2:Assume that the following data characterize the hypothetical economy of Trance: money supply = $200 billion; quantity of money demanded for transactions = $150 billion; quantity of money demanded as an asset = $10 billion at 12 percent interest, increasing by $10 billion for each 2- percentage-point fall in the interest rate.What is the equilibrium interest rate in Trance?At the equilibrium interest rate, what are the quantity of money supplied, the total quantity of money demanded, the amount of money demanded for transactions, and the amount of money demanded as an asset in Trance?Part...

David · Accepted Answer

Part 1 instructions:
* Describe economic terms and concepts in question.
* Describe your reasoning leading from concepts in question to the final answer.
*Write full sentences and use double spacing between paragraphs.
* Place copied sentences in quotation marks and list source materials used to arrive at your answers.
* Edit your work for sentence structure, spelling and appropriate formatting of paragraphs.
Your work should consist of at least 3 separate sections of text:
 
 1) description of economic terms and concepts,
 2) your reasoning and 
3) concluding paragraph which states the final  answer.
Concepts used:
Aggregate demand-this is the sum of consumption demand, investment demand, government spending and net exports.
AD= C+I+G+NX 
Aggregate supply-the total of all goods and services produced in the economy
Equilibrium GDP is where AD= AS 
Multiplier= change in GDP/ change in AD 
Part 1 problem 1:
Refer to the table below. 
Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level.
The above statement implies that the new level of real output demanded = 7+old level of real output demanded at each price level as shown in last column.
 By what percentage will the price level increase? 
The table shows us that at P= 100 the economy was in equilibrium as AD= AS. = 510
Now new equilibrium is where AD=AS= 513 and P= 108
So price has risen from 100 to 108—a rise of 8%
Will this inflation be demand-pull inflation or will it be cost-push inflation?
 Since the price change is caused by changes in real output demanded, which is due to change in aggregate demand this is demand pull inflation
 If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand?

Describe economic terms and concepts in question. * Describe your reasoning leading from concepts in question to the final answer. Write full sentences and use double spacing between paragraphs. ...

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Describe economic terms and concepts in question. * Describe your reasoning leading from concepts in question to the final answer. Write full sentences and use double spacing between paragraphs. ...