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Assume the economy is in long-run equilibrium and AD decreases. According to the Classical Model, what...
1. Assume the economy is in long-run equilibrium and AD decreases. According to the Keynesian Model, what will happen to...
1. Assume the economy is in long-run equilibrium and AD decreases. According to the Keynesian Model, what will happen to the equilibrium level of GDP and the Price Level? Does the New (Modern) Keynesian Model say anything different will happen? 2. Assume the economy is in long-run equilibrium and AD decreases. According to the Classical Model, what will happen to the equilibrium level of GDP and the Price Level?
Macroeconomics Schools of Thought In Class Assignment 1. Assume the economy is currently in long and...
Macroeconomics
Schools of Thought In Class Assignment 1. Assume the economy is currently in long and short run equilibrium. a. Suppose that the government in this economy goes to war. Holding everything else constant, what do you predict will happen to real GDP and the aggregate price level in the short run? What type of gap is created? Use the AS/AD model to illustrate. a. According to a Classical economist, how can the economy move back to its potential? Explain...
Figure: AD–AS Refer to Figure: AD–AS. Assume that the economy is in long-run equilibrium. If the...
Figure:
AD–AS
Refer to Figure: AD–AS. Assume that the economy
is in long-run equilibrium. If the Federal Reserve were to lower
the targeted federal funds rate we would most likely expect:
there will be a downward movement along the aggregate demand
curve AD1.
the aggregate demand curve will stay unchanged at
AD1.
the aggregate demand curve will shift to
AD3.
the aggregate demand curve will shift to
AD2.
LRAS Aggregate price level SRAS AD, AD AD, Y₂ YpY, Real GDP
2. Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases money supply by 6%. a) Illust...
2. Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases money supply by 6%. a) Illustrate the short-run effects of the monetary policy by using aggregate demand-aggregate supply model. Be sure to indicate the direction of change in real GDP, the price level and the unemployment rate. b) Illustrate the long-run effects of the monetary policy by using aggregate demand-aggregate supply model....
Assume the U.S. economy is in both short-run and long-run equilibrium, as shown in the graph...
Assume the U.S. economy is in both short-run and long-run equilibrium, as shown in the graph below. Suppose the federal government increases the amount of spending on the military. either the new a. Show the effect on the short-run equilibrium as a result of increased government spending. Using the graph, dra AD curve or new AS curve resulting from this change in spending. Instructions: Use the tool provided 'New Curve' to plot the appropriate line. After placing the curve, click...
The accompanying graph illstrates an economy in long-run equilibrium which is denoted by point FiR Suppose...
The accompanying graph illstrates an economy in long-run equilibrium which is denoted by point FiR Suppose a new technology is discovered which increases productivity. In the graph, demonstrate how the economy moves to its new long-run equilibrium by shifting the appropriate curves and placing point ELR at the new long- run equilibrium. LRAS SRAS LR In the long run, the aggregate price level decreases and real GDP (aggregate output) AD increases. Real GDP
The graphs illustrate an initial equilibrium for the economy. Suppose that the stock market broadly decreases....
The graphs illustrate an initial equilibrium for the economy. Suppose that the stock market broadly decreases. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Short-run graph Long-run...
Suppose the economy is initially in long-run equilibrium in the AD-AS model. Then stock prices decline...
Suppose the economy is initially in long-run equilibrium in the AD-AS model. Then stock prices decline sharply. Draw a diagram (show changes) of AD, LRAS, and SRAS for short run and long run with no government intervention.
Problem sel 3 2. The Spartanville economy is initially at long run equilibrium. On each graph,...
Problem sel 3 2. The Spartanville economy is initially at long run equilibrium. On each graph, draw the AD-AS graph showing the economy at the long run equilibrium. Label the axes, curves and show the equilibrium price level and GDP. “A” For each event, show on the graph the short run change. State which curve(s) shifts, if any, and which direction. Label the new short run equilibrium "SR eq" "B". How does the price level and GDP change in the...
The figure below depicts the aggregate demand curve (AD) and the long-run aggregate supply curve (LRAS) for the United States. The economy is initially at long-run equilibrium, at point A.
The figure below depicts the aggregate demand curve (AD) and the long-run aggregate supply curve (LRAS) for the United States. The economy is initially at long-run equilibrium, at point A.One of the most contentious issues among economists involves the economy’s adjustment to long-run equilibrium. Some economists believe that adjustment can and should occur naturally. This group, the classical economists, stresses the importance of aggregate supply. Others see the return to long-run equilibrium as an adjustment that occurs unpredictably and often...
Macroeconomics
Schools of Thought In Class Assignment 1. Assume the economy is currently in long and short run equilibrium. a. Suppose that the government in this economy goes to war. Holding everything else constant, what do you predict will happen to real GDP and the aggregate price level in the short run? What type of gap is created? Use the AS/AD model to illustrate. a. According to a Classical economist, how can the economy move back to its potential? Explain...
Figure:
AD–AS
Refer to Figure: AD–AS. Assume that the economy
is in long-run equilibrium. If the Federal Reserve were to lower
the targeted federal funds rate we would most likely expect:
there will be a downward movement along the aggregate demand
curve AD1.
the aggregate demand curve will stay unchanged at
AD1.
the aggregate demand curve will shift to
AD3.
the aggregate demand curve will shift to
AD2.
LRAS Aggregate price level SRAS AD, AD AD, Y₂ YpY, Real GDP
2. Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases money supply by 6%. a) Illustrate the short-run effects of the monetary policy by using aggregate demand-aggregate supply model. Be sure to indicate the direction of change in real GDP, the price level and the unemployment rate. b) Illustrate the long-run effects of the monetary policy by using aggregate demand-aggregate supply model....
Assume the U.S. economy is in both short-run and long-run equilibrium, as shown in the graph below. Suppose the federal government increases the amount of spending on the military. either the new a. Show the effect on the short-run equilibrium as a result of increased government spending. Using the graph, dra AD curve or new AS curve resulting from this change in spending. Instructions: Use the tool provided 'New Curve' to plot the appropriate line. After placing the curve, click...
The accompanying graph illstrates an economy in long-run equilibrium which is denoted by point FiR Suppose a new technology is discovered which increases productivity. In the graph, demonstrate how the economy moves to its new long-run equilibrium by shifting the appropriate curves and placing point ELR at the new long- run equilibrium. LRAS SRAS LR In the long run, the aggregate price level decreases and real GDP (aggregate output) AD increases. Real GDP
The graphs illustrate an initial equilibrium for the economy. Suppose that the stock market broadly decreases. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Short-run graph Long-run...
Problem sel 3 2. The Spartanville economy is initially at long run equilibrium. On each graph, draw the AD-AS graph showing the economy at the long run equilibrium. Label the axes, curves and show the equilibrium price level and GDP. “A” For each event, show on the graph the short run change. State which curve(s) shifts, if any, and which direction. Label the new short run equilibrium "SR eq" "B". How does the price level and GDP change in the...
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