Instructor] In this video, I want to tackle an entire AP macroeconomics free response exercise with you. But what about the short-run aggregate supply curve? And now I have to do the short-run Phillips curve, and that will show a relationship between inflation rate and unemployment. So I'm gonna do the inflation rate in the vertical axis which is typical. Ii) What is the impact on the Long-run aggregate supply? So here they're saying short-run aggregate supply curve, explain. Upload your study docs or become a. Assume that the government of Country X takes no policy action to reduce unemployment. Assume the economy of artland is currently. You would have more output at a given price level. B) Assume the Brazilian government has decreased spending by 50%. If you said hey, we would change the federal funds rate or we would increase the money supply or decrease the money supply, those would be monetary actions. As a grader of the AP Macroeconomics exam for the past 10 years and several years as a table leader, Julie has had the chance for exceptional professional development.
All right, let me draw that. I) What component of aggregate demand will change? Think of the short run as what happens immediately and what happens later due to the change being the long run. The way I think about it is if you have real GDP increasing, you're in a situation where you just have more economic activity, the national income has gone up. So you see our price level goes up and our aggregate output, our GDP, our real GDP, goes up as well. Or for a given amount of output, it might cost less because there's just people out there competing for that work. Assume the U. economy was operating at a short-run equilibrium when interest rates for investment loans increased. And then they say, label the short-run equilibrium as point B. Julie has taught AP and IB Economics for 19 years, at Plano East Senior High School, a large suburban school in Plano ISD just north of Dallas. It'll just be a vertical line. New container ships and equipment are increases in capital and therefore Investment will increase. We will balance covering some of the more challenging topics in the course material while trying some strategies and lessons to develop students' skills in economic analysis. AP® Macroeconomics (New & Experienced Teachers. And now let's draw our short-run aggregate supply which we have seen before.
And then if a lot of people are unemployed, they might be willing to work for less or they might have less money in their pocket with which to drive up the prices, and so you will have this inverse relationship right over here. And there's a couple of ways to think about that. They're gonna demand more 'cause now they have more money in their pockets, and so it's going to shift to the right.
So if our actual unemployment rate is higher than natural rate of unemployment, what will happen to the short-run aggregate supply? D) As a result of an increase in exports, export oriented industries increase expenditures on new container ships and equipment. On your graph in part (a), show the effect of higher exports on the equilibrium in the short-run, labeling the new equilibrium output and price level Y2 and PL2, respectively. Assume the economy of artland. Well, if we want to reduce the unemployment rate, one way to do the that would be to shift aggregate demand to the right. Was this an example of the long free response question or one of the shorter ones?
So that's the long-run aggregate supply. So maybe it looks just like this. Identify a fiscal policy action that could be used to reduce the unemployment rate in the short run. 103 Regulations Respecting the Laws and Customs of War on Land Annex to the. At any given price level, people are gonna want more. But here they're talking about aggregate supply. Draw a correctly labeled graph of aggregate demand and short-run aggregate supply, and show the impact on the equilibrium price level and real GDP of the fiscal policy action identified in part (c). Example free response question from AP macroeconomics (video. I would really appreciate your help here. And then your equilibrium price level would go down, price level sub two would go down. I don't understand the point that the firms increasing production simply because labor becomes cheaper in the situation where there's no demand. Want to join the conversation?
She has developed pedagogical strategies for skill and knowledge acquisition to share with participants from her experience. So this is going to be my unemployment rate which is going to be a percentage. And so here we would say it just remains the same. Our unemployment rate is higher than the natural level of unemployment. Answer - One point is earned for stating that the investment component of AD will change. So this is real GDP right over here, G-D-P. Now you're just going to have a long-run supply curve which is vertical. Ii) Equilibrium price level, labeled PL1. Assume the economy of andersonland answers. 520. class will eventually label you as a good cue er and easy to follow This skill.
And this would be in relation to lowering taxes or raising taxes or increasing or decreasing government spending. Think of the business cycle. AP®︎/College Macroeconomics. We could say wages come down which would shift the short-run aggregate supply curve to the right. All right, we have more parts here. All right, part (f).
Think of increases in the capital stock as increasing efficiency and productivity and increasing the potential output of the economy. Learn more about this topic: fromChapter 7 / Lesson 3. So let me draw a graph to even help to visualize this. Our experts can answer your tough homework and study a question Ask a question. Show each of the following. Label the current short-run equilibrium as point B. And so you would have your short-run aggregate supply curve shift to the right, short-run aggregate supply sub two. Let me draw it like that. B) Identify one fiscal policy government could implement to reverse the change in investment spending. Try it nowCreate an account. On the AP Macroeconomics lessons, we learn that due to expansionary fiscal policy, the government borrows loans because of the deficit in the budget. You could also think at a given output level, you would have a lower price level, at a given price level. Let's do the long-run first because we've seen before the long-run just sets our unemployment rate at the natural rate of unemployment, and it isn't related to our inflation rate.
Course Hero member to access this document. Based on the change in real GDP identified in part (d), will the supply of Country X's currency in the foreign exchange market increase, decrease, or remain the same, explain? So we could say because of high unemployment, that could apply wage pressure. And they say the short-run equilibrium we have an unemployment rate of 7% and an inflation rate of 3%. Become a member and unlock all Study Answers. And so it'll be a vertical line at our natural rate of unemployment which is 5%. B) Assume that there is an increase in exports from Andersonland. So I'll do a aggregate demand sub two. And so people say, hey, if you want me to work, you gotta pay me a little bit more, and so that could just lead to a higher inflation rate. In the long run, which of the following shift to the right, shift to the left, or remain the same? So our short-run aggregate supply would look like that. All right, let's do the next section.
C) Based on your answer in part (b), what is the impact of higher exports on real wages in the short-run? So remember, Phillips curves show the relationship or the theoretical relationship between the unemployment rate and the inflation rate. And one way to do that, would be to put more money in people's pockets, and one way to do that, is to have a tax cut. So our unemployment rate right over here is 7%, and our inflation rate right over here is 3%. The goal is for each participant to leave the summer institute better prepared to teach AP Macroeconomics. During the capital inflow process, the rest of the world wants USD because they can only invest using US dollars inside the U. S. This increases thedemand for USD in the foreign exchange market and appreciates the value of USD in terms of other foreign currency. In the short-run is what you have to have noticed,,,, as wages can't adjust in the short-run,,, therefore if the price level is increasing and wages are not,, real wages are falling. So if we're talking about aggregate demand and aggregate supply, our vertical axis is going to be our price level, I'll just call that PL, and our horizontal axis that is going to be our real GDP. Read more about the curve shifts of this and learn the AD-AS model through an example. So I could call that our long-run Phillips curve, and it's going to be right there at 5%.
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