Hopefully you can help me and I need this ASAP. I need this by tomorrow in the morning. You answer the questions if it decreases increases, expands or not. Also, can you explain it too?
This are what if situations. Don't answers don't have to be in depth. Just short and to the point. (This is an AP Economics class for a senior.
1. What happens to the aggregate supply if the price of copper decreases dramatically?
2.What happens to the aggregate supply if the US government enacts a 5% corporate profits tax?
3. What happens to the bank lending, supply of money, and aggregate demand if the Federal Reserve lowers reserve requirements to 1.25%?
4. What happens to the aggregate supply if the urban land rents increases dramatically in property boom?
5. What happens to the bank lending, supply of money, and aggregate demand if the Federal Reserve increases discount rate to 3.5%?
6. What happens to the supply of money, capital flow to the US, imports, and exports if the US inflation rises unexpectedly relative to Japan?
7. What happens to the demand of money, the supply of money, and interest rate if the US demands fewer Japanese goods?
Thank you so much.
Take a shot, what do you think?
Hints: the questions are all about shifting a supply curve. If the price of something that is generally an input or component to other goods (eg. copper) goes UP, suppliers will want a higher price for any given level of output -- that is, supply shifts in.
Take it from here
Sure, I can help you with those questions. Here are short answers along with explanations on how to arrive at the answers:
1. If the price of copper decreases dramatically, the aggregate supply will increase. This is because copper is an input for many industries, and a decrease in its price reduces production costs, leading to an increase in aggregate supply. To explain this, you can mention that a decrease in input prices reduces production costs, allowing firms to produce more goods and services at a given price level.
2. If the US government enacts a 5% corporate profits tax, the aggregate supply will decrease. This is because higher taxes on corporate profits reduce the profitability of businesses, discouraging investment and reducing production capacity. To explain this, you can mention that higher taxes lower the incentives for businesses to invest and expand, leading to a decrease in aggregate supply.
3. If the Federal Reserve lowers reserve requirements to 1.25%, bank lending and the supply of money will increase, and aggregate demand will likely increase as well. Lower reserve requirements allow banks to lend out more money, which increases the supply of money in the economy. This, in turn, leads to increased borrowing and spending by consumers and businesses, raising aggregate demand. To explain this, you can mention that lower reserve requirements provide banks with more funds to lend, which stimulates borrowing and spending, thereby increasing aggregate demand.
4. If urban land rents increase dramatically in a property boom, the aggregate supply will generally not be directly affected. This is because land rents primarily impact specific industries and not overall production capacity. However, higher land rents can indirectly affect production costs, potentially leading to a decrease in aggregate supply if businesses pass on the increased costs to consumers. To explain this, you can mention that while higher land rents may raise production costs for some industries, it does not directly impact the overall ability of the economy to produce goods and services.
5. If the Federal Reserve increases the discount rate to 3.5%, bank lending and the supply of money will likely decrease, and aggregate demand may decrease as well. A higher discount rate increases the cost of borrowing for banks, reducing their incentive to lend money. This can lead to reduced borrowing and spending by consumers and businesses, resulting in a decrease in both the supply of money and aggregate demand. To explain this, you can mention that a higher discount rate makes borrowing more expensive for banks, which reduces their ability to lend, thereby decreasing the supply of money and potentially reducing aggregate demand.
6. If US inflation rises unexpectedly relative to Japan, the supply of money, capital flow to the US, imports, and exports may potentially be impacted. Higher inflation in the US compared to Japan may lead to a decrease in the supply of money as the central bank may take measures to curb inflation. Capital flow to the US may also be affected as investors may shift their investments to countries experiencing lower inflation. Imports may increase as US goods become relatively more expensive, while exports may decrease as foreign goods become relatively cheaper. To explain this, you can mention that relative differences in inflation rates can affect the supply of money, capital flows, as well as the competitiveness of imports and exports between countries.
7. If the US demands fewer Japanese goods, the demand for money, the supply of money, and interest rates may not be directly impacted. The demand for money depends more on factors such as overall economic activity, interest rates, and inflation rather than specific changes in trade patterns. However, if the decrease in demand for Japanese goods leads to a decrease in overall economic activity, it may indirectly impact the demand for money and interest rates. To explain this, you can mention that while changes in trade patterns can have indirect effects on the demand and supply of money, it is more closely related to broader economic factors such as interest rates and inflation.