AD/AS Model for economics

In summary, the question asks if it is possible to calculate the increase in real output resulting from a $100 million increase in government spending in the AD/AS model, if the AD and AS curves intersect in the intermediate section of the AS curve. The person asking for help has not been able to find the answer and is unsure if anyone can help on this forum. Additional information is needed to provide a solution, including the definitions of AD and AS curves.
  • #1
Mr Davis 97
1,462
44

Homework Statement


If the AD curve intersects the AS curve in the intermediate section of the AS curve, can you calculate the increase in real output in the AD/AS model resulting from the $100 million increase in government spending? If not, what additional information would you need?

Homework Equations

The Attempt at a Solution


I'm not sure if anyone could help me with this, since this forum doesn't have a specific section for economics, but I've tried for about two hours to figure out what the answer is, which I'm assuming is simple. I've looked around in my textbook and on the internet to no avail.
 
Physics news on Phys.org
  • #2
Mr Davis 97 said:

Homework Statement


If the AD curve intersects the AS curve in the intermediate section of the AS curve, can you calculate the increase in real output in the AD/AS model resulting from the $100 million increase in government spending? If not, what additional information would you need?

Homework Equations

The Attempt at a Solution


I'm not sure if anyone could help me with this, since this forum doesn't have a specific section for economics, but I've tried for about two hours to figure out what the answer is, which I'm assuming is simple. I've looked around in my textbook and on the internet to no avail.

Perhaps some of us could help, but we are not allowed to do so (nor would I be inclined to) on the basis of what you have submitted. PF Rules require you to do work on the problem first, and ask for help where you are stuck. Besides that you need to define AC and AC curves. Some of us can guess what they are, but we should not need to.
 

1. What is the AD/AS model for economics?

The AD/AS model is a macroeconomic model that shows the relationship between aggregate demand (AD) and aggregate supply (AS) in an economy. It is used to analyze how changes in these factors affect the overall output and price level of a country.

2. What are the components of the AD/AS model?

The AD/AS model is composed of three main components: aggregate demand, aggregate supply, and the intersection point of the two curves. Aggregate demand is the total demand for goods and services in an economy, while aggregate supply is the total supply of goods and services in an economy. The intersection point represents the equilibrium point where the quantity demanded equals the quantity supplied.

3. How does the AD/AS model explain inflation and recession?

The AD/AS model explains inflation and recession by showing how changes in aggregate demand and aggregate supply can lead to changes in the overall price level and output of an economy. For example, an increase in aggregate demand can lead to higher prices and output, while a decrease in aggregate demand can lead to lower prices and output. Similarly, an increase in aggregate supply can lead to lower prices and higher output, while a decrease in aggregate supply can lead to higher prices and lower output.

4. What factors can shift the AD/AS curve?

The AD/AS curve can be shifted by various factors such as changes in consumer spending, government spending, investment, net exports, and money supply. For instance, an increase in consumer spending can shift the aggregate demand curve to the right, while a decrease in government spending can shift the aggregate demand curve to the left. Similarly, an increase in money supply can shift the aggregate supply curve to the right, while a decrease in money supply can shift the aggregate supply curve to the left.

5. What are the limitations of the AD/AS model?

The AD/AS model has some limitations, including the assumption of a constant price level and the inability to account for all factors that can affect aggregate demand and supply. Additionally, the model does not take into consideration the role of expectations and the possibility of market failures. It is also a simplified representation of a complex economy and may not accurately reflect real-world scenarios.

Similar threads

Replies
11
Views
1K
Replies
8
Views
800
  • Calculus and Beyond Homework Help
Replies
1
Views
2K
  • Calculus and Beyond Homework Help
Replies
8
Views
4K
  • Calculus and Beyond Homework Help
Replies
2
Views
4K
  • Calculus and Beyond Homework Help
Replies
1
Views
1K
  • Calculus and Beyond Homework Help
Replies
6
Views
7K
  • Calculus and Beyond Homework Help
Replies
13
Views
2K
  • Special and General Relativity
Replies
9
Views
1K
Back
Top