Question
In: Economics
England in 1997. Suppose the economy of England is initially in a long run equilibrium. Draw...
England in 1997. Suppose the economy of England is initially in a
long run equilibrium. Draw a Keynesian Cross (AE/AP). AD/AS
diagram, IS/LM diagram, and Money Market diagram for England. Label
Everything
Solutions
Expert Solution
England 's Economy in 1997,. As it is in long run Equilibrium.
Below are graphs showing long run equlibrium under Keynesian Cross, AD-AS,IS-LM and Money Market .
# Keynesian Cross and long run equlibrium
The above graph consists of aggregate Expenditure curve and Aggregate sullpy curve( 45°) long run aggregate sullpy curve is a vertical straight line .
At long run Equilibrium level of income ,there id full employment in the Economy.
#AD-AS and long run Equilibrium
The above graph shows aggregate demand ( negetive slope)& aggregate supply (+ ve slope) curves. SRAS curve shows potential output level corresponding to price level..
At the long run equlibrium ,where there is full employment in the economy, all three curves intersect one another, depicting that the real output equals the potential output and at full Equilibrium level.
# IS-LM graph and long run Equilibrium
The above graph shows intersaction of three curves depicting equlibrium rate of interest corresponding to gfp level in the economy
#Money Market equlibrium in the long run
Money market Equilibrium in the long run occurs when demand for money ( -ve slope) equals supply of money ( vertical line) corresponding to long run aggregate supply curve.
The long run Equilibrium Quantity of money is determined corresponding to rate of interest.
Rahul Sunny answered 2 years agoRelated Solutions
Suppose that the economy is initially in long-run equilibrium as depicted in the AD-AS model. Suppose...
Suppose that the economy is initially in long-run equilibrium
as depicted in the AD-AS model. Suppose politicians believe that
the current level of output is too low and encourage the central
bank to engage in expansionary monetary policy.
a. (4 points) Discuss two ways in which the Central Bank can try
to increase the money supply. Be explicit.
b. (6 points) What are the effects of the expansionary policy in
the short run? Show in the appropriate graph(s).
c. (5...
Suppose that the economy is initially in long-run equilibrium as depicted in the AD-AS model. Suppose...
Suppose that the economy is initially in long-run equilibrium as
depicted in the AD-AS model. Suppose politicians believe that the
current level of output is too low and encourage the central bank
to engage in expansionary monetary policy.
a. (4 points) Discuss two ways in which the Central Bank can try
to increase the money supply. Be explicit.
b. (6 points) What are the effects of the expansionary policy in
the short run? Show in the appropriate graph(s).
c. (5...
11. Suppose that the economy is in a long run equilibrium. a.) Draw an Aggregate Supply...
11. Suppose that the economy is in a long run equilibrium. a.)
Draw an Aggregate Supply - Aggregate Demand graph of the economy.
Label the equilibrium point “E1 ". The Fed conducts an open market
sale of bonds. On your graph, show the movement of the appropriate
curves in the short-run AND long-run. Label the short run
equilibrium point “E2” and label the long run equilibrium point
“E3” b.) Draw an Aggregate Supply - Aggregate Demand graph of the
economy....
Suppose the economy is in a long-run equilibrium. a. Draw a diagram to illustrate the state...
Suppose the economy is in a long-run equilibrium.
a. Draw a diagram to illustrate the state of the economy. Be sure
to show aggregate demand, short run aggregate supply, and long-run
aggregate supply.
b. Now suppose that a stock market crash causes aggregate demand to
fall. Use your diagram to show what happens to output and the price
level in the short run. What happens to the unemployment
rate?
c. Use the sticky-wage theory of aggregate supply to explain what...
53.) Assume that the economy is initially in a long-run equilibrium. Now suppose that businesses and...
53.) Assume that the economy is initially in a long-run
equilibrium. Now suppose that businesses and households become more
pessimistic about the future and decide to invest less in new
structures, tools, and equipment, and also decide to engage in less
consumption spending, at the current price level.
a.) What will happen to output and the price level in the short
run? Output will (rise, fall, stay the same) and the price level
will (rise, fall, stay the same). (2...
Question 1: The AD-AS Model Suppose the economy is initially in long-run equilibrium, and there is...
Question 1: The AD-AS Model
Suppose the economy is initially in long-run equilibrium, and
there is a positive demand shock.
a. Describe the short-run effects of this positive demand
shock on output, unemployment,
and prices.
b. Describe how the economy will automatically move back to
the potential level of output
in the long run.
c. Illustrate your answers in point (a) and (b) using an AD-AS
graph. Show the short-run
effects and the long-run adjustments.
Suppose the economy is initially in the long-run equilibrium, but a drop in consumer confidence causes...
Suppose the economy is initially in the long-run equilibrium,
but a drop in consumer confidence causes the AD curve to
shift to the left. What will be the impact on prices and output in
the short run and long run?
Select the correct answer below:
In the short run, and long run, both prices and output will
fall.
In the short run, prices will fall, but output will stay the
same. In the long run, both prices and output fall....
Suppose the economy is initially in long-run equilibrium and there is a positive demand shock. Using...
Suppose the economy is initially in long-run equilibrium and
there is a positive demand shock. Using the AD-AS diagram clearly
describe the effects of the demand shock in the short run and how
the economy will adjust through the self-correcting mechanism in
the long run
Suppose the economy is initially at a long-run equilibrium. Then the central bank increases the money...
Suppose the economy is initially at a long-run equilibrium. Then
the central bank increases the money supply. Assuming any resulting
inflation is unexpected, explain any changes in GDP, unemployment,
and inflation in the short-run that are caused by the monetary
expansion. Explain your conclusions using three diagrams: (i) one
for the IS-LM model, (ii) one for the AD-AS model, and (iii) one
for the Phillips curve.
Suppose the economy is in long-run equilibrium.
Scenario 1 - Pessimism Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time. Scenario 1 - Pessimism. Which curve shifts and in which direction? aggregate demand shifts right aggregate demand shifts left aggregate supply shifts right. aggregate supply shifts left.
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