Starting from short-run equilibrium, graphically illustrate and explain what happens to RGDP, the average price level,...

Starting from short-run equilibrium, graphically illustrate and explain what happens to RGDP, the average price level, and unemployment if consumer confidence decreases and the cost of domestic resources rises.

Starting from long-run equilibrium, graphically illustrate and explain what happens to RGDP, the average price level, and unemployment if the cost of labor decreases and business expectations decline.

The following follow-up questions are based on your conclusions #2

Follow-up: Is the economy at the natural rate of unemployment? Explain.

Follow-up: How would you describe the current state of the economy?

Follow-up: What types of unemployment exist at the current state of economy?

Expert Solution

Rahul Sunny answered 2 years ago

1. Using the AS-AD model diagram, illustrate what happens to the LONG-RUN and SHORT-RUN equilibrium level...

1. Using the AS-AD model diagram, illustrate what happens to the LONG-RUN and SHORT-RUN equilibrium level of aggregate output and inflation, when the economy is hit by a negative (adverse) demand shock and there is NO POLICY response. Suppose the economy is at a long-run equilibrium before it is hit by the negative demand shock. Make sure you properly label all the axes and curves. Will the negative demand shock more likely lead to an expansion or recession in the...

MACRO: Show graphically what happens to the price level in both the short and long-run when...

MACRO: Show graphically what happens to the price level in both the short and long-run when the economy experiences an inflationary gap.

using the model that predicts the price level and RGDP, show what happens when there is...

using the model that predicts the price level and RGDP, show what happens when there is a decrease in a country's labor productivity, and then expansionary fiscal policy (temporarily) restores the original level of RGDP. Hint: There will be points 1, 2, 3 and 4.

What determines the equilibrium price level and real GDP? In the short run, a shift in...

What determines the equilibrium price level and real GDP? In the short run, a shift in aggregate demand establishes a new, but temporary, equilibrium along the short-run aggregate supply curve. TRUE or FALSE? Please Explain your Answer. In the long run, the short-run aggregate supply curves shifts so that changes in aggregate demand determine the price level but not the equilibrium level of output or real GDP. TRUE or FALSE? Please explain your answer. Propose three functions of the Federal...

a) Using the AS-AD model, graphically illustrate and describe in words what happens to the long-run...

a) Using the AS-AD model, graphically illustrate and describe in words what happens to the long-run and short-run equilibrium level of aggregate output and inflation, when the economy is hit by a negative demand shock and the fiscal policy responds to the shock. Make sure you properly label all the axes and curves. Be specific to describe how the fiscal policy can act in this case. b) Describe the government spending multiplier and how it would affect the fiscal policy...

Starting from a long run equilibrium show the short run impact of COVID 19 (short term...

Starting from a long run equilibrium show the short run impact of COVID 19 (short term temporary supply shock) on output and price level graphically and explain the mechanism of these changes. Suppose in the initial long run steady state equilibrium output is 22 trillion dollars and the price level is 100.

Starting from a short-run equilibrium, show and explain how a reduction of the income tax affects...

Starting from a short-run equilibrium, show and explain how a reduction of the income tax affects GDP, using the money-interest, the expenditure schedule and the AD-AS graphs. Assuming that at the initial point the GDP is at its potential level, explain how self-correcting mechanisms work after the reduction of the income tax.

Use the AD-AS diagram to graphically illustrate the short-run and long run impacts of an increase...

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Illustrate graphically the determination of the equilibrium level of both employment and money wages in the...

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(a) Using the Aggregate Demand (AD) model diagram, illustrate what happens to the equilibrium level of...

(a) Using the Aggregate Demand (AD) model diagram, illustrate what happens to the equilibrium level of aggregate output when the Federal Reserve (Fed) engages in a tightening of monetary policy. Make sure you properly label all the axes and curves. (b) Would the Federal Reserve be more likely to engage in a tightening of monetary policy during an expansion or recession? Explain in one sentence. (c) Has the Federal Reserve recently (past 1-2 months) been engaging in a tightening of...

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