2. Using standard equations and notations of the sticky price model from the book, derive the...

2. Using standard equations and notations of the sticky price model from the book, derive the equation of Aggregate supply (AS) equation and explain it graphically. What will be shape of AS curve if all prices are sticky?

3. A) Explain the difference between traditional and Ricardian view of impact of budget deficit on the Economy.

B) Due to Corona Virus emidemic in Bangladesh, Government tax collection has declined, but government’s expenditure increased.

(i) Explain specific details of how governments expenditure increased, and tax collection declined and what would be its impact on budget deficit.

(ii)What are the ways government can finance the budget deficit due to Corona epidemic? Do you thing financing budget deficit will create inflation?

Expert Solution

aggregate supply is the total supply of goods and services sold by firms in a national economy during a specific year. it is that amount of goods and services that firms are willing to sell at a given price level in an economy. it is the relationship between the price level and production of an economy.

Rahul Sunny answered 2 years ago

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