Mt445- 02: Managerial Economics
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MT445- 02: Managerial Economics
Unit 8 Project
Professor Hernan Verlarde
Chapter 19
5. (Economic Fluctuations) Why doesn’t the National Bureau of Economic Research identify the turning points in economic activity until months after they occur?
Answer
The economy does not move through phases smoothly due to fluctuations and random disturbances. These fluctuations are caused by random disturbances and seasonal fluctuations.
As a snapshot Economists can’t always distinguish a temporary drop in production from the beginning of a downturn (McEachern, 2009). Temporary downturns due to weather and temporary peaks of business do not represent an accurate long term picture of the economic health. Recessions and depressions are measured over several quarters and only looking back at complete economic data will tell the true story.
15. (Aggregate Demand and Supply) Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and in which direction? What happens to aggregate output and the price level in each case?
a. The price level changes
b. Consumer confidence declines
c. The supply of resources increases
d. The wage rate increases
Answers
a.) The price level changes will affect both aggregated demand and supply curve. A drop in the price levels raises the overall quantity of goods demanded. An increase in price reduces the quantity of goods and services supplied and shift the short-run aggregate supply curve to the left. A decrease in the expected price raises the quantity of goods and services supplied and shifts the short-run supply curve to the right.
b.) A decrease in consumer confidence causes a decrease of the demand curve. The decrease causes the demand curve to shift leftward.
c.) The supply of resources increasing will cause the curve to shift leftward. This is due to the fact that more products being produced than what are...
Unit 8 Project
Professor Hernan Verlarde
Chapter 19
5. (Economic Fluctuations) Why doesn’t the National Bureau of Economic Research identify the turning points in economic activity until months after they occur?
Answer
The economy does not move through phases smoothly due to fluctuations and random disturbances. These fluctuations are caused by random disturbances and seasonal fluctuations.
As a snapshot Economists can’t always distinguish a temporary drop in production from the beginning of a downturn (McEachern, 2009). Temporary downturns due to weather and temporary peaks of business do not represent an accurate long term picture of the economic health. Recessions and depressions are measured over several quarters and only looking back at complete economic data will tell the true story.
15. (Aggregate Demand and Supply) Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and in which direction? What happens to aggregate output and the price level in each case?
a. The price level changes
b. Consumer confidence declines
c. The supply of resources increases
d. The wage rate increases
Answers
a.) The price level changes will affect both aggregated demand and supply curve. A drop in the price levels raises the overall quantity of goods demanded. An increase in price reduces the quantity of goods and services supplied and shift the short-run aggregate supply curve to the left. A decrease in the expected price raises the quantity of goods and services supplied and shifts the short-run supply curve to the right.
b.) A decrease in consumer confidence causes a decrease of the demand curve. The decrease causes the demand curve to shift leftward.
c.) The supply of resources increasing will cause the curve to shift leftward. This is due to the fact that more products being produced than what are...