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In: Economics
Question 2 The yearly barley is almost ready to be harvested in Ogdenville (still funny). The...
Question 2
The yearly barley is almost ready to be harvested in
Ogdenville (still funny). The AD, SRAS and LRAS curves are given
as:
Y = 100/P+99
And the aggregate supply curves as:
P = 2Y-100
Y* = 100
a.[2 points] Find the output and price level for Ogdenville in
the short run.
b.［4 points] If potential output is 100, is ogdenville facing
a recession or exapansion? In addition, Illustrate the situation
(LRAS, SRAS and AD curves with SR and LR equilibriums) TIP: use a
ploting software to double check not a virus...
Assume that the Ogdenville economy faces a shock like no
other! A negative demand a hits the economy. Consumers reduce
consumption to only necessary goods and investors sentiment
dwindles. The new AD curve can be described as:
Y = 75 + 100/P
c.[6 points] With this new information, find the Long Run
equilibrium and the Short Run equilibriums. And illustrate the new
AD curve in the above diagram.
d.［20 points] (Hard) Apply adapative expectation to find the
new short run supply curve. Find how many guesses firms will need
to take such that long run equilibrium is achieved. (At each time
period provide the expected price level, the price level and the
output level.). The SRAS can also be expressed as:
Pt=2Yt+Pet−200
Pt=2Yt+Pet−200
Solutions
Rahul Sunny answered 7 months agoRelated Solutions
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