Use the following macroeconomic outcomes that may result from events impacting the national economy to answer the questions below.

A) Price levels rise and GDP rises due to unplanned decreases in business inventories

B) Price levels fall and GDP rises due to unplanned increases in business inventories

C) Price levels fall and GDP falls due to unplanned increases in business inventories

D) Price levels rise and GDP falls due to unplanned decreases in business inventories

 

Using your understanding of shortages and surpluses and converting that to the macro perspective, could you determine the outcome of the following events?  Remember, a shortage in micro equates to unplanned decreases in inventories, and surpluses denote unplanned increases in inventories.

From the options above (A - D),  select the one that describes the outcome of the following events. (each letter can be used more than one time).

Your answers only need to indicate the letter above (ex. 1. B, 2. A, and no explanation is needed).

1. aggregate demand -- increases; short-run aggregate supply -- no change

2. aggregate demand -- no change; short-run aggregate supply -- increases

3. aggregate demand -- decreases; short-run aggregate supply -- no change

4. aggregate demand -- no change; short-run aggregate supply -- decreases

5. The value of dollar depreciates worldwide

6. Interest rates increase

7. The tax code is changed to create more deductions which reduces household taxable income

8. Military spending is decreased by 25% (no increases in other areas)

9. Consumer/Business confidence improves dramatically upon the election of President Jeff Caldwell

10. Nationally, most workers are required to stay home due to a pandemic.

Answer rating: 100% (QA)

Solution To answer your questions I will use the aggregate demandaggregate supply ADAS model which is a widely used macroeconomic model that explains shortrun and longrun economic changes through the ... View the full answer