Graph an economy where your actual output is above full employment output. Use the AD/SRAS and...

Graph an economy where your actual output is above full employment output. Use the AD/SRAS and LRAS model. Label all axis and lines accurately. a. Identify your potential or full employment output, Yf or Qf. b. Identify the actual output and price level. c. Identify the phase of the business cycle, the economy is operating within and explain how you know. d. Actual output= $750 Million Potential output =$ 600 Million MPC= .5 i. Calculate MPS. (write the formula and show all work) ii. Calculate the Spending Multiplier (write the formula and show all work) iii. Calculate the Tax Multiplier (write the formula and show all work) iv. Identify the type of Fiscal Policy to fix this economic problem. v. Calculate the maximum change to government spending, if this were the only tool utilized. (write the formula and show all work) What direction is the change? vi. Calculate the maximum change to taxes, if this were the only tool utilized. (write the formula and show all work) What direction is the change? vii. Explain how the graph changes. What shifts, what happens to output, unemployment and price level, in the short run? 2. Based off your understanding of automatic stabilizers and the above economic problem. a. Draw a graph of the Government spending and Tax revenue model. i. Label the balanced budget point with the same value as the full employment output above. ii. Label a point on the graph to show what happens when the actual output is below the full employment output. iii. State if the budget is balanced, in a deficit or in a surplus. Explain. iv. Based off the policy in d (v), explain the effect on the budget. 3. Draw the Loanable funds market in equilibrium and label the axis and curves accurately. a. Due to your answer in 2a (iv) explain how the market changes. i. Why does the market change? ii. What shifts and in which direction” iii. What happens to the real interest rate? iv. Based off the interest rate change, how will gross private investment change?

Expert Solution

Rahul Sunny answered 7 months ago

Draw an economy operating (SRAS=AD) below the full employment level of output. if the above economy...

Draw an economy operating (SRAS=AD) below the full employment level of output. if the above economy is left alone from government intervention, describe the Long Run adjustment. Long run adjustment: please specify the effects of this adjustment on: Nominal wage: output: Prices: Draw an economy operating (SRAS=AD) beyond the full employment level of output. if the above economy is left alone from government intervention, describe the Long Run adjustment. Long run adjustment: please specify the effects of this adjustment on:...

The graph below depicts the full-employment level of output and the actual level of real GDP.

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The LRAS shows where the economy should be. The SRAS and the AD shows where the...

The LRAS shows where the economy should be. The SRAS and the AD shows where the economy is by creating the short-run equilibrium. Do you think that we are currently at the LRAS in our current economy? I do not understand how to figure this out. Please help! Thank you

Assume the economy is at full employment. Use the IS-LM/ AD-AS model to show the short-run...

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Assume that the economy is operating at full employment (long-run equilibrium). Use our AD and AS...

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An increase in taxes when the economy is above full employment ______ aggregate demand and...

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Draw your own graph by adding a new AS or AD curve to the graph above...

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The economy of Country X is at full employment. (a) Draw a correctly labeled graph of...

The economy of Country X is at full employment. (a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following. (i) Current price level, labeled PL1 (ii) Current real output, labeled Y1 (b) Assume that household income increases as a result of recent economic prosperity in Country X. On your graph in part (a), show the effect of the increase in household income on real output and price level....

Assume that the economy falls into recession. (i.e., output falls below full employment output) and the...

Assume that the economy falls into recession. (i.e., output falls below full employment output) and the Fed describes by buying bonds. Briefly describe the process by which the money supply is affected? What does this do to the Interest rate? Briefly explain the chain of causality of how monetary policy might help affect help move the economy back toward full employment output (That is, how can monetary policy affect AD in the short-run?) Discuss the factors or circumstances that may...

Suppose country Zee is a closed economy. Consider AD, SRAS and LRAS for the economy of...

Suppose country Zee is a closed economy. Consider AD, SRAS and LRAS for the economy of Zee. Tye economy begins at price level P0, with output equal potential GDP=Y*, budget is balanced. 3.1 Suppose the government of Zee increases tax, T while keeping government expenditure G unchanged. Are we having budget deficit or surplus? What would be the effect of this action on loanable funds, real interest rate, private savings and investment, and levels of debt in country Zee? 3.2...

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