var imagesXXXlarge = ",,,"; var imagesXlarge = "krugmanapecon2e_mod45_fig-01,krugmanapecon2e_mod45_fig-02,,"; var imagesLarge = ",,,,"; var imagesSmall = "krugmanap2e-ch45-fig-2,,,,"; var imagesMedium = ",,,,,,"; xBookUtils.showAnswers['krugmanapecon2e_mod45_cyu_1a'] = ""; xBookUtils.showAnswers['krugmanapecon2e_mod45_cyu_1b'] = "Aggregate demand shifts left; real GDP and the aggregate price level fall."; xBookUtils.showAnswers['krugmanapecon2e_mod45_cyu_1c'] = "Nominal wages will decrease as a result of the recessionary gap and the decrease in the aggregate price level, leading to an increase in short-run aggregate supply. The rightward shift in the short-run aggregate supply curve moves the economy back to long-run equilibrium at potential output and a lower aggregate price level."; xBookUtils.showAnswers['krugmanapecon2e_mod45_cyu_1d'] = "Lower government spending will decrease the government budget deficit. With less borrowing by the government, the demand for loanable funds will decrease, shifting the demand curve from D 1 to D 2 and decreasing the interest rate from r 1 to r 2 in the accompanying figure."; xBookUtils.showAnswers['krugmanapecon2e_mod45_fr_2_rubric'] = "
Rubric for FRQ 2 (12 points)
1 point: The vertical axis is labeled “Aggregate price level” or “Price level” and the horizontal axis is labeled “Real GDP.”
1 point: The AD curve is labeled and slopes downward, the SRAS curve is labeled and slopes upward, and the LRAS curve is labeled and vertical at Yp. The equilibrium aggregate price level and aggregate output are shown on the axes where the AD curve and SRAS curve intersect, which is to the left of the LRAS curve.
1 point: A new, labeled AD curve is shown to the right of the original AD curve. The new equilibrium price level and aggregate output are shown on the axes at the new equilibrium point. The new equilibrium does not need to be at potential output.
1 point: The vertical axis is labeled “Interest rate” and the horizontal axis is labeled “Quantity of loanable funds.”
1 point: The demand curve is labeled and slopes downward; the supply curve is labeled and slopes upward. The equilibrium interest rate and quantity are shown on the axes at the point where the curves intersect.
1 point: The demand for loanable funds shifts to the right and the new equilibrium values are shown on the axes. The interest rate is higher.
1 point: On the foreign exchange market graph, the vertical axis is labeled “Exchange rate” and the horizontal axis is labeled “Quantity of U.S. dollars.”
1 point: The demand curve slopes downward, the supply curve slopes upward, and the curves are labeled. The equilibrium exchange rate and quantity are shown on the axes at the point where the two curves intersect.
1 point: The supply of U.S dollars decreases, shifting the supply curve to the left.
1 point: This occurs because the higher interest rate in the United States decreases the outflow of capital to countries with a relatively low interest rate.
1 point: The value of the U.S. dollar has increased (it has appreciated).
1 point: Both U.S. exports and aggregate demand will decline.
"; xBookUtils.showAnswers['krugmanapecon2e_sect08_fr_1_rubric'] = "Rubric for FRQ (6 points)
1 point: A foreign exchange market graph labeled “Dollar/yuan” on the vertical axis and “Quantity of yuan” on the horizontal axis, with a downwardsloping demand curve and an upward-sloping supply curve.
1 point: The equilibrium exchange rate is labeled on the vertical axis and the equilibrium quantity of yuan is labeled on the horizontal axis, and both values correspond with the intersection of the supply and demand curves.
1 point: The demand curve shifts to the left and a new, lower value of the Chinese yuan is labeled on the vertical axis to the left of the new equilibrium point.
1 point: The demand for Chinese yuan decreases because the lower real interest rate in China leads to lower returns on financial investments, which decreases capital inflow from the United States.
1 point: The U.S. current account balance will move to a deficit.
1 point: The decrease in the value of the Chinese yuan will decrease U.S. exports to China and increase U.S. imports from China, because U.S. exports become more expensive and imports from China become less expensive. These changes result in a current account deficit in the United States.
";