if the economy is in a current long run equilibrium at $8 Trillion, A) Draw the...

if the economy is in a current long run equilibrium at $8 Trillion,

A) Draw the AS/AD graph, label currecnt Equilibrium "A", what happeins if A stock market crash causes households and businesses to become skeptical about the future economy. Show the effect on your graph and label the SR eq “B"

B) If the government responded by using fiscal policy (starting from B), show where the long run equilibrium ends up, label it “E”

C) Starting from A, what happens if the economy gets supply shock? Graph it on a new graph and label it “B”

D) Show the outcome of using fiscal and monetary policy, label it C. Compare and contrast the results with the previous example.

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Expert Solution

Rahul Sunny answered 1 year ago

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