Draw a Classical Economic Model that is operating at the long-run equilibrium. In the short run,...

Draw a Classical Economic Model that is operating at the long-run equilibrium. In the short run, what will most likely happen to RGDP if the AD curve shifts right?
1. RGDP will increase
2. RGDP will decrease
3. RGDP will stay the same

Draw a Classical Economic Model that is operating at the long-run equilibrium. In the long run what will most likely happen to RGDP if the AD curve shifts right?
1. RGDP will continue to increase
2. RGDP will continue to decrease
3. RGDP will return to its original level

According to the Classical economists, what will happen if wages suddenly decrease (ceteris paribus)?
1. AD will increase
2. AD will decrease
3. LRAS will increase
4. LRAS will decrease
5. SRAS will increase
6. SRAS will decrease

Suppose that banks are holding extra money in their reserves. What can we infer about Say’s Law.

Say’s Law will hold
Say’s Law will not hold

Expert Solution

Rahul Sunny answered 2 years ago

Suppose the economy is operating at both short-run and long-run equilibrium. a) Draw an initial graph...

Suppose the economy is operating at both short-run and long-run equilibrium. a) Draw an initial graph showcasing this information. Label the initial equilibrium (A).

Distinguish between short run equilibrium and long run equilibrium in the monetarist/new classical perspective

A country is initially at the long-run and short-run equilibrium. However, in the short-run, the country...

A country is initially at the long-run and short-run equilibrium. However, in the short-run, the country experiences a drop in the general price level and the real GDP at the same time due to a temporary shock and we know there is one shock only. (a) Which curve(s) in the LRAS-SRAS-AD diagram must have shifted to generate the observation above? If any of the curves has shifted, state the direction of the shift, propose a factor that leads to the...

1-The key difference between short run and long run is * 2-In the short- run equilibrium,...

1-The key difference between short run and long run is * 2-In the short- run equilibrium, if Real GDP ˂ Potential GDP, then over time price level will * 3-Okun’s law states that * 4-If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect: * 5-If government reduces taxes, in the short run, *

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...

1. Draw the AD-AS model in long-run equilibrium. Using this graph, depict what happens in the...

1. Draw the AD-AS model in long-run equilibrium. Using this graph, depict what happens in the short run and in the long run if housing prices fall across the country. 2. Draw the AD-AS model when the economy is initially encountering an inflationary gap and then the government uses contractionary fiscal policy to return to long-run equilibrium.

In words explain Classical Dichotomy, Money Neutrality, and the Classical theory (short and long run).

How long is the short run? The specific factor model is a short-run model because two...

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a) “According to the long-run classical model, there will be a decrease in the world interest...

a) “According to the long-run classical model, there will be a decrease in the world interest rate and the world level of investment when the aging populations of industrial countries start running down their savings and, at the same time, the investment appetite of emerging economies begins to slow down.” True/False, explain with the aid of one diagram for the world market for loanable funds. (10 points) Note: The world as a whole is a closed economy. b) A new...

2. (a) “The short-run equilibrium of a perfectly competitive firm is similar to its long-run equilibrium”....

2. (a) “The short-run equilibrium of a perfectly competitive firm is similar to its long-run equilibrium”. Do you agree? Explain your answer (b) Monopolists have adverse effects on the consumer society and should be eliminated”. Discuss. (1200 words)

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