stupid question… but is there a correlation between price level, inflation, interest rate? thanks.</p>
Also, can anyone explain impact of loanable funds changes on other aspects? thanks again.</p>
When price level rises, inflation rises. Price rise can be caused by government expenditure. Government expenditure raises the interest rate.</p>
Price level=inflation
one goes up so does the other</p>
GOOD LUCK EVERYONE</p>
the simpson90: You have a couple things mixed up:</p>
Fiscal policy effects interest rates indirectly in one of 4 related ways, but simply put whatever direction FIscal made AD move r will follow. The two most common arguments are delta AD to delta rGDP which equals RNI and thus delta RNI to delta MD to delta r. </p>
The argument when following government expenditure is delta deficit spending to delta demand for loanable funds in the same direction or delta supply of loanable funds in the opposite direction to delta r in the direction of the deficit spending. up deficit spending to up DLF to up r.</p>
Interest rate changes result in changes in the quantity of Investment demanded. Causation is problematic/backwards when going from Investment to r.</p>
I want to say it would be E only if it said there’s an increase in govt spending, not a cut in taxes.</p>
Alright. Also, for individual firm graph, such as the one in this question <a href=“College Board - SAT, AP, College Search and Admission Tools”>College Board - SAT, AP, College Search and Admission Tools;
(number 1A), how can I tell where to draw ATC? Thanks.</p>
2 questions
- How does expected price level relate to SRAS?
- Assuming fixed exchange rates, if country Z’s rate of inflation increases relative to its trading partners, Country Z’s imports and exports will most likely change in which of the following ways?
Imports Exports
(A) Decrease Decrease
(B) Decrease Increase
(C) Increase Decrease
(D) Increase Increase
(E) No change No change</p>
I thought because rate of inflation increases that means that the currency depreciates which means exports increase and imports decrease? Why is it C?</p>
If country Z’s rate of inflation increases relative to its trading partners, then things in country Z will become more expensive relative to other places. Therefore, the prudent move is to import more (bring in the cheaper stuff) and export less.</p>
EDIT: For question 1, I think that if the price level is expected to be lower, then AS increases in the short-run. However, if the price level is expected to be higher, then AS will decrease in the short-run.</p>
Lol @ prudent</p>
<h1>smartdiction</h1>
Twitter speak ftw</p>
Appleandrice. What’s the answer to that question about a tax cut and decrease of discount rate?</p>
Can someone go over the Break Even point quickly and the graph of it?</p>
The break even point is where no economic profit is being made (normal profit=0). This is where P=ATC, which makes sense because price is exactly equal to the total costs.</p>
Remember, if you want to find economic profit (in a perfectly competitive market), find Q where MR=MC. Once Q is found, go up to price and then down (profit) or up (loss) to get ATC. If P=ATC, then this is defined as the break even point.</p>
@apple TenebrousNight’s explanation is right. I think you missed the part where they said it was a fixed exchange rate system, so the currency would not appreciate/depreciate.</p>
As for question 1, if the price level is expected to be higher then workers will build in increases in wages into their contracts, shifting SRAS left. If the price level is expected to be lower, then they won’t bother, which shifts SRAS right.</p>
can someone go to this post & answer these questions for me?:</p>
<a href=“AP MACRO...CollegeBoard Audit exam questions help?! - AP History & Social Sciences - College Confidential Forums”>AP MACRO...CollegeBoard Audit exam questions help?! - AP History & Social Sciences - College Confidential Forums;
thank youuuu</p>
What about the 45 degree line for Break Even point? Hows that work.</p>
@whiphi, the answer was E.
The opportunity cost of me studying econ right now is missing South Park…darn</p>
@Staller The break even point is where C=DI, which the 45 degree line represents.</p>
Assume that the economy is at full employment. Policymakers wish to maintain the price level but want to encourage greater investment. Which of the following combinations of monetary and fiscal policies would best achieve this goal, respectively?
(A) No change, Contractionary
(B) Expansionary, No change
(C) Expansionary, Contractionary
(D) Expansionary, Expansionary
(E) Contractionary, Expansionary</p>
I don’t get this at all. Please help.</p>
@tenebrous, encourage greater investment = decrease interest rate so expansionary monetary policy. To get the price level as close to what it was before you have to do the opposite of the monetary policy with the fiscal policy, which is contractionary fiscal policy.
C</p>
Policymakers want to to reduce interest rates to increase investment. As a result, they want to use expansionary monetary policy to increase the money supply. This normally would increase the price level due to AD shifting right, but to offset this policymakers would use contractionary fiscal policy which would shift AD left. If they choose numbers that balance, AD should hopefully have no change, but the investment component of AD would be greater, and the government spending component of AD would be smaller.</p>