3. There is an increase in the wages in Canada, which causes an increase in cost...

3. There is an increase in the wages in Canada, which causes an increase in cost of production by firms in the country.

a. Use the AS/AD model to demonstrate the short-run impact of this event on the aggregate demand (AD) curve, the short-run Aggregate Supply curve (AS), real GDP, price level and unemployment. Your answer should include:

i. An AS/AD graph with all curves and quantities clearly labeled. For curves and quantities that change, label their old values with a “0” subscript and their new values with a “1” subscript. For curves and quantities that don’t change, leave out the subscript.

ii. Specific predictions for which variables will go up, which will go down, which will remain the same, and which could go up or down.

b. Use the AS/AD model to demonstrate the long-run impact of this even on the Aggregate Demand curve, the short-run Aggregate Supply (AS) curve, the long-run aggregate supply (LRAS) curve, real GDP, and the price level. Your answer should include:

i. An AS/AD graph with all curves clearly labeled. For curves and quantities that change, label their old values with a “0” subscript and their new values with a “1” subscript. For curves and quantities that don’t change, leave out the subscript.

ii. Specific predictions for which variables will go up, which will go down, which will remain the same, and which could go up or down.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Which of the following statements is correct? An increase in wages payable is deducted from wages...

Which of the following statements is correct? An increase in wages payable is deducted from wages expense to convert wages expense to cash paid to employees. A decrease in prepaid insurance is added to insurance expense to convert insurance expense to cash paid for insurance. An increase in accounts receivable is added to sales to convert sales to cash received from customers. A decrease in accumulated depreciation is added to depreciation expense to convert depreciation expense to cash paid for...

Which of the following is correct? a. An increase in the money supply causes the interest...

Which of the following is correct? a. An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts right. b. An increase in stock prices reduces consumption spending so that aggregate demand shifts left c. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left. d. All of the above are correct.

An increase in wages of oil rig workers has increased the cost of producing oil. How...

An increase in wages of oil rig workers has increased the cost of producing oil. How is the supply curve affected by this newly incurred cost? Represent graphically plot against the demand curve, label all points, and explain. How does a $20 dollar subsidy effect the supply curve of Oil per barrel? Represent graphically, plot against the demand curve and explain. Identify the type of good. Explain how the changes will affect demand. Pepsi price declines what happens to the...

Which of the following causes the dollar to depreciate relative to the British pound? an increase...

Which of the following causes the dollar to depreciate relative to the British pound? an increase in the supply of pounds a decrease in the supply of dollars a decrease in the demand for dollars an increase in the demand for pounds

Which of the following is a period cost? a. Wages of an assembly worker b. Depreciation...

Which of the following is a period cost? a. Wages of an assembly worker b. Depreciation on factory equipment c. Sales commissions d. Power A cost that has been incurred in the past and is irrelevant is termed a(n): a. variable cost. b. opportunity cost. c. sunk cost. d. differential cost. Compute factory overhead cost from the following costs: Depreciation on factory buildings $ 45,950 Depreciation on office equipment 32,980 Direct materials used 96,840 Indirect labor 6,580 a. $96,840 b....

Interpret what an increase in demand and an increase in supply mean. Discuss the causes of...

Interpret what an increase in demand and an increase in supply mean. Discuss the causes of an increase in demand and an increase in supply. How are increases in demand and supply expressed graphically?

The greenhouse effect causes an increase in global temperatures, which has contributed to global climate change....

The greenhouse effect causes an increase in global temperatures, which has contributed to global climate change. This temperature increase is due primarily to: a) CO2 and other greenhouse gases allowing more solar radiation to penetrate Earth's surface b) CO2 and other greenhouse gases slowing the escape of heat from Earth c) the loss of ozone that trapped cooling UV radiation in the atmosphere d) CO2 and other greenhouse gases slowing the escape of UV radiation from Earth

Create a cost-benefit analysis for legalizing marijuana in Canada. Identify 2-3 stakeholders.

30. An increase in household saving causes consumption to A. rise and aggregate demand to increase....

30. An increase in household saving causes consumption to A. rise and aggregate demand to increase. B. rise and aggregate demand to decrease. C. fall and aggregate demand to increase. D. fall and aggregate demand to decrease. 35. Which of the following Fed actions would both decrease the money supply? A. buy bonds and raise the reserve requirement B. buy bonds and lower the reserve requirement C. sell bonds and raise the reserve requirement D. sell bonds and lower the...

Suppose Urbanville initially has fully employed resources and now experiences a recession which causes an increase...

Suppose Urbanville initially has fully employed resources and now experiences a recession which causes an increase in unemployed resources (most likely labor). Show with the PPF model (graph) what occurs when there is an increase in unemployed resources by drawing a graph of the above economy (don’t worry about the numbers, just a qualitative answer will suffice; put good Z on the horizontal axis when you draw the graph) Scientists in Urbanville have created a new technique that allows them...

Subjects