Log in Lilum canna 7 years agoPosted 7 years ago. Direct link to Lilum canna's post “Pl guide how and from whe...” Pl guide how and from where we can find the answers of critical thinking questions • (10 votes) Daniel Riley 7 years agoPosted 7 years ago. Direct link to Daniel Riley's post “* 1.)* If households dec...” * 1.)* If households decided to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run? *In the Short Run...* Also, with this shift, employment would decrease due to a less demand for output. (10 votes) Xiomara Kuwae 7 years agoPosted 7 years ago. Direct link to Xiomara Kuwae's post “Does anyone know where I ...” Does anyone know where I can find the answers of critical thinking questions • (5 votes) Olivia **INACTIVE** 7 years agoPosted 7 years ago. Direct link to Olivia **INACTIVE**'s post “There are no answers. Yo...” There are no answers. You have to come up with them on your own and/or ask smart people to tell you the answers. (3 votes) willpeoples1 7 years agoPosted 7 years ago. Direct link to willpeoples1's post “I challenge anyone who re...” I challenge anyone who reads this to answer the very last question • (5 votes) Daniel Riley 7 years agoPosted 7 years ago. Direct link to Daniel Riley's post “3. If the US Congress cu...” 3. If the US Congress cut taxes at the same time that businesses became more pessimistic about the economy, what would the combined effect on output, the price level, and employment be, based on the AD/AS diagram? - Tax cuts will increase consumption spending and business investment spending. If businesses are pessimistic and not increasing investment spending with this new incentive, then the increase in consumption spending will decrease any effects a decrease in business investment spending would have had. Effectively, the tax cut would keep the aggregate demand curve in it's current position and ad/as equilibrium would not change. (2 votes) John Smith 2 years agoPosted 2 years ago. Direct link to John Smith's post “What about the MPC does t...” What about the MPC does this affect Aggregate Demand? because in one of the practice questions, the MPC is an incorrect answer. Even though we spent all that time learning multipliers and how they effect the Real GDP much more than you'd think. But no, apparently more income and more spending does not result in higher produce demanded. Fix your question Khan Academy, or if I am wrong, then at least explain it properly. • (3 votes) Rubytranhcm 4 years agoPosted 4 years ago. Direct link to Rubytranhcm's post “how to know if a tax will...” how to know if a tax will shift AD or AS? In case of AD, a tax cut will increase AD-> AD shifts right. In case of AS, a tax cut will reduce cost of production -> AS increase --> AS shifts right. • (2 votes) Shantelle Santee 7 years agoPosted 7 years ago. Direct link to Shantelle Santee's post “Want to double check with...” Want to double check with a question: Assume the Australian economy is initially in a long run equilibrium, with real GDP equal to $1.5 trillion. Suppose, now, that there is a global stock market boom -- which enhances real wealth significantly, shifting aggregate demand (AD) to the right, and increasing real output, in the short run, by $60 billion. Assume LRAS does not shift over time. 1. The economy would stay stuck, with GDP at $1.56 trillion. 2. The economy would recede because AD would automatically move back. 3. The economy would return to its initial equilibrium because the SRAS would move to the right. 4. The economy would return to its initial equilibrium because AD would move to the left. 5. None of the above. WHICH ONE IS IT? THANK YOU! • (1 vote) Jonibek Isomiddinov 7 years agoPosted 7 years ago. Direct link to Jonibek Isomiddinov's post “I think the first situati...” I think the first situation is going to occur as the LRAS curve remains the same, whereas the AD curve shifts to the right from the position of equilibrium with LRAS. As it was stated in the article, the changes in AD when the economy is near its potential GDP will just put pressure on prices causing higher inflation. Thus, economy will face higher inflation with no possible growth of output (as potencial gdp is already reached) causing stagflation. (1 vote) Clemence 7 years agoPosted 7 years ago. Direct link to Clemence's post “"Name some factors that c...” "Name some factors that could cause AD to shift, and explain whether they would shift AD to the right or to the left." Would it be right to give the following factors? Can anyone see other important factors I might have forgotten? If we consider that: real GDP = C + I + G + NX (consumption + investment + government spending + net exports) Factors causing AD to shift to the right: Factors causing AD to shift to the left: Thanks for the help! • (1 vote) Jonibek Isomiddinov 7 years agoPosted 7 years ago. Direct link to Jonibek Isomiddinov's post “Change in consumer level ...” Change in consumer level of confidence in the future of economy might fit as well (1 vote) Davide Taraborrelli 3 years agoPosted 3 years ago. Direct link to Davide Taraborrelli's post “What will happen to the A...” What will happen to the AD curve when there is an increase in money demand due to credit card fraud (excess of demand for money in respect to liquidity available)? My intuition: This shock increases interest rates (you have to pay people more to let go of their money), which will bring investments down (a loan cost more) and output. So the AD will shift to the left. Is this correct? • (1 vote) devastatingroy 7 years agoPosted 7 years ago. Direct link to devastatingroy's post “if the government wants t...” if the government wants to increase its spending to turn on the economy, where will that money come from if they don't increase tax or cut their spending in military or sth like that. but wouldn't an increase in tax will shift the AD curve to the left and bring the opposite outcome? • (1 vote) Bharath Reddy Makthal 6 years agoPosted 6 years ago. Direct link to Bharath Reddy Makthal's post “The government borrows th...” The government borrows the money from other economies or from the central banks or from the people of the economy via bonds etc.. (1 vote) Richard Yiu a year agoPosted a year ago. Direct link to Richard Yiu's post “"confidence is usually hi...” "confidence is usually high when the economy is growing briskly and low during a recession" Does the passage mean "expansion" instead? • (1 vote)Want to join the conversation?
-If households save more, they are spending less. Household consumption would decrease which would shift the Aggregate demand curve to the left. This shift will cause a new ad/as equilibrium. * If the AD curve shifts to the left, then the equilibrium quantity of output and the price level will fall.*
Therefore, Price level, output and employment would all remain the same.
If neither the government nor the reserve bank change their policies in response to this shock, then, ceteris paribus, in the long run:
- Tax cuts: making consumers more confident --> C rises and so does real GDP
- Tax benefits for companies investing --> I rises and so does real GDP
- Spendings on new road infrastructures --> G rises and so does real GDP
- New trade agreement with a new partner --> NX rise and so does real GDP
- Austerity policy by the government --> reduces G and real GDP
- Having a trade partner going into recession --> NX decrease and so does real GDP
Tax and government spending( i.e the G of the AD) are the tools of the Fiscal policy.
In order to bring back the economy to levels of potential GDP either from the inflationary gap(GDP above potential GDP situation) or the recessionary gaps (GDP below potential GDP situation), govt employs these tools.
An increase in Tax cuts and a decrease in the G, (usually employed in an Inflationary gap) discourage Consumption and Investment Components and AD decreases which will shift the AD curve to left bringing down the levels of GDP.
And the opposite is done in case of a recessionary gap.
