Determine which of the Federal Reserve entities controls each of the following policy tools. The reserve requirement is determined by the Board of Governors.
For each of the following scenarios, determine the effect on aggregate supply. There is an unexpected decrease in oil prices.
The government increases the amount that all producers are required to contribute to health insurance coverage. As oil prices decline, all producers will experience a decrease in the cost of production, as they will spend less on inputs using oil. When costs across the board decrease, it means producers can produce more goods and services at every price level.
This will cause aggregate supply to increase. An increase in aggregate supply is shown as a shift in the aggregate supply curve to the right.
Use the graph of Remi's economy to complete the following statements. Point B is referred to as a trough. The movement from point A to point E is called a business cycle.
Point D is referred to as a peak. The movement from point B to point D is called an expansion. Explanation A business cycle is the short-term fluctuations experienced in the economy due to changes in levels of economic activity.
It occurs from the economy moving between expansions and recessions.
An expansion is a phase of the business cycle characterized by increasing real GDP, income, and employment. A peak is the point in the business cycle where real GDP reaches a maximum. The peak marks the end of an expansion. A recession is a decline in real output for at least two consecutive quarters.
A trough is the lowest point of economic activity in the business cycle, where real GDP reaches a minimum; the trough marks the end of a recession. The long-run aggregate supply curve is vertical because: Explanation The long-run aggregate supply curve is vertical because all input prices are flexible in the long run.
An increase in the price level will cause the cost of inputs to rise, and as the input prices adjust firms will not increase output as the price level increases.
Therefore, output remains the same, but at a higher price. For each of the following scenarios, determine whether the situation described can be attributed to the real-balances effect, the interest-rate effect, or the foreign-purchases effect.
As a result of an increase in the price level, the cost of borrowing increases, which causes people to buy fewer cars.ECO Week 1 Knowledge Check ECO week 2 Learning Team Reflection Production and Cost Analysis.
Discuss this week’s objectives with your team. Include the topics you feel comfortable with, any topics you struggled with, and how the topics relate to your field.
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