PART A

Imagine that in the year 2022, China's economy slows significantly, causing a decrease in demand for US exports. Use the AD/AS model to explain the likely short run impacts on US. GDP and the aggregate price level. What do you anticipate will happen to U.S. consumption expenditure and US. employment? Please explain your reasoning for each ofyour predictions and show graphically as appropriate. Rubc Criteria Not Developi ProfiCIe Distinguish Weigh EVIdent ng nt ed t 4 Explain the likely short run impacts on US. GDP using the AD/AS model Explain the likely aggregate price level use the AD/AS model 4 Create a graphic to illustrate the anticipated result to U.S. consumption expenditure and U.S. employment 5 Explain the anticipated result to U.S. consumption expenditure and U.S. employment 5 Articulation of response (citations, grammar, spelling, syntax, or organization that negatively impact readability and 2 articulation of main ideas.) Total: 20 1. Suppose that there is a positive aggregate supply shock Which graph most accurately shows how this would affect the aggregate demand - aggregate supply model? Note that the new curve is shown in gray. a. AS curve shifts right: c. AS curve shifts left: b. AD curve shifts right: AD curve shifts left- y/ N m 2. Suppose that there is a positive aggregate demand shock. Which graph most accurately shows how this would affect the aggregate demand - aggregate supply model? Note that the new curve is shown in gray. _a. AS curve shifts right: _c. AS curve shifts left: AD AD A81 A52 b. AD curve shifts right: (1. AD curve shifts left: it 3. Suppose that we observe a decrease in wages. Which graph most accurately shows how this would affect the aggregate demand - aggregate supply model? Note that the new curve is shown in gray. a. AS curve shifts right: _c. AS curve shifts left: AD A0 A51 A52 b. AD curve shifts right: (1. AD curve Shifts left: it 4-. Suppose that we observe relative price increase of US goods. Which graph most accurately shows how this would affect the aggregate demand - aggregate supply model? Note that the new curve is shown in gray. _a. AS curve shifts right: _c. AS curve shifts left: AD AD A51 A52 b. AD curve shifts right: d. AD curve shifts left: {L1 Use the following information to answer questions 5 through 7: The graph below shows the AD-AS diagram for Spain. All numbers are in billions. 1100 1000 JAD 900 800 700 600 Price Level 500 400 SRAS 300 200 100 LRAS 0 0 100 200 300 400 500 600 700 800 900 1000 1100 Real GDP 5. What is the level of Potential GDP in Spain? 6. What is the size of real GDP in the short-run equilibrium? 7. What is the price level in the short-run equilibrium?Use the following information to answer questions 8 through 11: The graph below shows the AD-AS diagram for Spain. Suppose that the economy experiences a negative aggregate demand shock denoted by the move from ADI to ADZ. Note that the new curve is shown in gray. 1 200 1 100 1000 900 800 700 600 Price Level 500 400 300 200 1 00 0 100 200 300 400 500 600 700 800 900100011001200 Real GDP 8. What has happened to the cyclical unemployment in Spain (select one)? a. Cyclical unemployment remains the same. b. Cyclical unemployment decreased. c. Cyclical unemployment increased. 9. What happened to the frictional unemployment in Spain (select one]? a. Frictional unemployment remained the same. b. Frictional unemployment decreased. c. Frictional unemployment increased. 10. What happened to the structural unemployment in Mselect one)? a. Structural unemployment remained the same. b. Structural unemployment decreased. c. Structural unemployment increased. 11. What happened to the price levels in Melect one]? a. Price levels remained the same. b. Price levels decreased. c. Price levels increased. Use the following information to answer questions 12 through 15: The graph below shows the AD-AS diagram for Spain. Suppose that the economy experiences a positive aggregate supply shock denoted by the move from SRASl to SRASZ. Note that the new curve is shown in gray. 1200 1100 1000 900 800 700 600 500 Price Level 400 300 200 1 00 0 100 200 300 400 500 600 700 800 900100011001200 Real GDP 12. What happened to the cyclical unemployment in Spain [select one]? a. Cyclical unemployment remains the same. b. Cyclical unemployment decreased. c. Cyclical unemployment increased. 13. What happened to the frictional unemployment in Spain (select one)? a. Frictional unemployment remains the same. b. Frictional unemployment decreased. c. Frictional unemployment increased. 14. What happened to the structural unemployment in Spain {select one]? a. Structural unemployment remains the same. b. Structural unemployment decreased. c. Structural unemployment increased. 15. What happened to the price levels in Spain [select one]? a. Price levels remain the same. b. Price levels decreased. c. Price levels increased