a) Using the AD-AS framework discussed in class, demonstrate the impacts of spending on infrastructure and...

a) Using the AD-AS framework discussed in class, demonstrate the impacts of spending on infrastructure and a tax cut on output and inflation in the shortrun.

b) Also explain the likely impact of spending on infrastructure on output in the long-run and show this on your AS-AD diagram.

c) Explain (using your own words) what would happen to unemployment and output in the short run if job support payments (both Jobseeker and Jobkeeper) were switched off.

Expert Solution

Solution:

a)When there is an increase in investment in the form of infrastrcture development in an AD-AS framework. The AD-AS framework shows the what determines total supply and total demand.

The AD curve will shift rightwards as there is increase in investment and led to higher output. As the AD curve shifts the Price level will also increase.
The above expalins the change in any component of Y=C+I+G+NX will have a rightward shift or increase the demand in the equlibrium and economy will generate higher output than before. It will lead to a higher price level of commodities prevaling in the market.

b) In Long run the buisness cycle will change and the economy and will lead to boom period.

c) When the job support payments are switche off there will be a reduction in the Governent Spending, Which lead to a leftward shift in the AD curve. In the short run there will be excess supply of labour which leads to unemployment and transient recession in the economy.

Rahul Sunny answered 2 years ago

Based on the AS-AD framework, explain and demonstrate the effect of the following situations on the...

Based on the AS-AD framework, explain and demonstrate the effect of the following situations on the equilibrium income and price levels i) An increase in the cost of imported goods that are used as inputs for domestically produced products.

If we increase government spending on education and infrastructure how will this impact AD/AS in the...

If we increase government spending on education and infrastructure how will this impact AD/AS in the a) Classical Model b) Keynesian Model c) Supply-side Model

Explain crowding out of investment via increased government spending using both the AD-AS framework and closed-economy...

Explain crowding out of investment via increased government spending using both the AD-AS framework and closed-economy loanable funds simultaneously, drawing both the short-run and long-run equilibria.?

What are the economic benefits of infrastructure spending? What are the economic costs of infrastructure spending?...

What are the economic benefits of infrastructure spending? What are the economic costs of infrastructure spending? Explain the economic circumstances in which you think the benefits of increased infrastructure spending would outweigh the costs?

Explain, using the AD/AS framework and with the aid of a graph, how a trade war...

Explain, using the AD/AS framework and with the aid of a graph, how a trade war with the US will impact on China’s GDP. DO NOT USE SAME ANSWER AS JUST POSTED WITH A CLEAR GRAPH!! :)

1) Using an AS-AD model of the economy, demonstrate on a graph how different fiscal and...

1) Using an AS-AD model of the economy, demonstrate on a graph how different fiscal and monetary policies impact the economy. 2} How would you calculate the fiscal policy change needed to achieve full employment?

Using an AD- AS model and the classical business cycles framework, show graphically and explain the...

Using an AD- AS model and the classical business cycles framework, show graphically and explain the effects of an unanticipated increase in the money supply (unanticipated expansionary monetary policy).

20. a. Demonstrate how an increase in income affects spending on a normal good using an...

20. a. Demonstrate how an increase in income affects spending on a normal good using an Income-consumption curve, a demand curve and an Engle curve. Make sure all of your graphs are well labelled and briefly explain the effect you are demonstrating on each one b. The price of a good decreases. Explain how this would affect the demand for a good by discussing both the substitution effect and the income effect of the price change.

explain how the various categories of federal government spending (such as spending on entitlements, or infrastructure...

explain how the various categories of federal government spending (such as spending on entitlements, or infrastructure or basic research) qualify as either consumption or investment spending. explain how the various categories of federal government spending (such as spending on entitlements, or infrastructure or basic research) qualify as either consumption or investment spending.

Using the IS/LM and AS/AD framework, discuss what would happen to r, y, and the price...

Using the IS/LM and AS/AD framework, discuss what would happen to r, y, and the price level (p) in both the short and long run. Show the IS/LM and AS/AD graphs for full credit. 1. There is an exogenous decrease in money demand. 2. Consumer confidence increases 3. When discussing the classical model I believe there was some discussion of the effects of a balanced-budget increase in government expenditures (∆G=∆T). Now let’s consider these in a Keynesian model Suppose that...

Question