Question

Could you please help me to answer these questions with clear writing or typing. Thank you very much!

LO5e-ADAS model QUESTION5 10 MARKS For each of the following three (3) situations below, using a separate AD/AS diagram for each situation: 1) Show the effect on a diagram-1 or 2 marks. 3) Explain your reasoning (where appropriate you must use the AD formula in your 2) Describe the impact i.e. explain the diagram-GDP &GPL-1 mak explanation)-1 mark. As a starting point have AD intersect AS in the Keynesian range Ceteris paribus applies to each situation. (1 mark deducted if starting point is wrong) Read the following passage and then answer the questions that follow Economic rumble set to ripple out from quake-shattered Canterbury Statements have been made this week-considered iresponsible by many economists-that Canterbury's earthquake will be good for the economy. This is based on the assumption that a rebound in retail spending to replace lost material possessions will occur. Economist Paul Dalziel gets straight to the point: "The first thing to say is we have lost a substantial amount of wealth. We have lost our physical capital. On a national level there is a negative impact and at local level an intensely negative impat. Economist Shamubeel Eaqub says up to 30 percent of small businesses may fail following a natural disaster DominionPost.(11 September, 2010).BusinessDay B7 Answer the following questions a) The claim has been made that the eart or the economy'. For the shor-term only, show 3 marks) b) Dalziel disagrees with the assessment that the earthquake will be good for the economy. For the shot-term only, show, describe and explain why Dalziel considers the earthquake an economic setback. (3 marks) The earthquake will result in considerable capital investment. Show, describe and explain both the short term and long term impacts. c) 4 marks) Note: You willose 1-mark t you do not start on the Keynesian range of the AD curve. Remember to property label l diagrams, and to show, describe and explain. No marks will be awarded for diagrams unless both description and explanation are provided and at least one is correct. For each diagram not labelled correctly, a maximum of 1-mark will be deducted

Answer 1

Answers to Second Part

a) One of the reasons earthquake does not have a large short term impact on the economy is that production quickly shifts to other regions. At the same time, regional production actually increases due to earthquake-related rescue and the cleanup, rehabilitation and recovery processes. There is no significant changes in net migration, private consumption, investment, exports, imports or government consumption. Hence, it is said that earthquake will be good for the economy in the short term.

b) According to Dalziel, earthquake is an economic setback. The income and output falls. In the short term, earthquake have a negative impact on output, income and employment. Measured by GDP,recovery spending may lead to higher output and employment after a period of time. Even this positive effect, however, is somewhat of an illusion because GDP typically does not account for all the economic losses from the earthquake, notably loss of capital. There is no way that an earthquake can be viewed as good news economically, even if GDP is boosted for a few quarters as a result of recovery. And for very poor economies, the earthquake may scar their economic futures for a long time to come.