Please enter your answers online on Canvas ECN 102 PROBLEM SET 15 Spring 2024 Prof. Cristian Pardo Due: Wednesday, April 24 The Aggregate Demand-Aggregate Supply (AD-AS) model Questions | through 10 use the following graphs on the AD-AS model. Assume that the economy starts at full employment (Y*) at point eo. P X 1. Which of the graphs above illustrates the effect on the economy in the short run if the Fed conducts an expansionary monetary policy that lowers real interest rates (r |)? (a) A (b)B C (d)D 2. As taught in class, which of the reasons below best justifies the answer to question 1? (a) Businesses will produce more, then supply increases (b) Businesses will purchase more plant and equipment, then demand increases (c) The government is spending more, then demand increases (d) All of the above 3. As taught in class, which of the reasons below describes the movement from point eo to point e that takes place as a consequence of the shock from question 1? (I) There's more demand for goods, thus firms produce more; (II) Firms use more overtime hours and late shifts (a) I but not 11 (c)land I (b) I but not I (d) Neither I nor 11 4. If the economy is left alone at point e;, which of the following events is likely to occur? (a) The economy will overheat (b) Firms will try to hire workers from other companies (c) Straight-time wages will tend to increase (d) All of the above 5. Which of the graphs above illustrates the effect on the economy in the transition to the long run if the economy is left alone? (a) None (b)B (c)C (d)D 6. What else happens during the transition, as described in questions 4 and 5? (a) Production costs increase (b) Next exports (NX) fall (c) Autonomous consumption (A) falls (d) All of the above 7. Once output reaches full employment (Y*) (a) There is a tight labor market (b) There is a slack (or slow) labor market (c) The AS curve shifts up (d) None of the above 8. The price level (P) the economy reaches after the economy has moved to the long-run equilibrium, relative to its initial level (point o), is (a) higher (b) lower (c) the same (d) can't tell with the information provided 9. The output level (Y) that the economy reaches after the economy has moved to its long-run equilibrium, relative to its initial level (point eo), is (a) higher (b) lower (c) the same (d) can't tell with the information provided 10. The level of real wages the economy reaches after the economy has moved to its long-run equilibrium, relative to its initial level (point eo), is (a) higher (b) lower (c) the same (d) can't tell with the information provided