# Supply and demand questions as well as some definitions

Supply and demand questions as well as some definitions IdentificationsGive a definition and explain the significance of the following 6 terms:Law of Demand; Phillips Curve; frictional unemployment; deadweight loss; open market operations; managed exchange rates, real gdp, aggregate price levelHot dogsUsing a supply-demand graph, predict the effect on the price and quanity of hot dogs of the following two events: 1. Many taco restaurants open in the area. 2. A sales tax is imposed on hot dogs. 3. The price of mustard rises1. The price of ketchup rises 2.The local price of hamburgers fallsAssume that the mustard/ketchup as to be offered as part of the hotdog/hamburger Note: make sure you have explained the reasons for your demand and/or supply curve shifts.Tax incidenceIf a tax is imposed on the price of a particular product, the burden of the tax in general falls on the consumers and the producers. Suppose the product in question has a very price-inelastic demand as compared with the price elasticity of supply. If a sales tax is imposed on this product, which side (suppliers or demanders) will wind up paying the bulk of the tax? Explain, using words and a supply-demand graph.Aggregate demand and supplyDraw an aggregate demand (AD) and aggregate supply (AS) graph showing the determination of P and Y. Explain carefully what P and Y are (that is, define them carefully). Note: it is very important to be careful in defining these terms. We have been over this issue many times.Using a Keynesian Cross diagram (C+I+G+X-M against Y with the 45 degree line), illustrate the effect of a monetary policy that lowers the interest rate.. Keep assuming that P is constant. Show geometrically why the effect on Y is greater than the shift in G. Again: you need to be careful on this. This is something that has been asked before.Now assume that prices are not constant and that the aggregate supply curve (AS) is upward sloping. What will the effect be on the multiplier effects you dealt with in question 5? Explain carefully.MultipliersChanges in aggregate expenditure can ignite ?multiplier effects on income and output. Suppose the marginal propensity to consume in question 5 above is equal to .75. How much then would the multiplier effect of a \$ 1 billion increase in government expenditure (G) turn out to be? Explain.Monetary policyBecause of recent unconventional monetary policies some now fear that the Fed will lose its independence in making monetary policy decisions. Explain and evaluate this.Phillips curve What is the argument that the Phillips Curve is vertical in the long run? Write the answer and explain.Exchange ratesIn the foreign exchange market, what is actually being traded for what? (What is meant by trading currency for another currency?) Explain.Basic AD and ASWhy does the aggregate demand (AD) fall if the aggregate price deflator (P) rises? How is the argument different from the case of the demand curve for widgets or hot dogs? Explain.:

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