Imagine that in the year 2022, China’s economy slows significantly, causing a decrease in demand for US exports. Use the AD/AS model to explain the likely short run impacts on U.S. GDP and the aggregate price level. What do you anticipate will happen to U.S. consumption expenditure and U.S. employment? Please explain your reasoning for each of your predictions and show graphically as appropriate.
As per the situation, in 2022, China's economy slows down and
demand decreases for US exports. In short run, Aggregate demand
curve shifts left side from AD1 to AD2 as
shown in the figure (1). This will apply pressure on price level to
reduce as the supply is also decreasing. Output decreases from
O1 to O2 due to lower demand and new short
run equilibrium shifts from E1 to E2. Due to
economic slow down, demand decreases, so unemployment will
increase.This will affect both countries. From all these
conditions, we anticipate decrease in US consumption
expenditure.
Any change in macro economic variables like
Consumption, Export-Import, Government expenditure, Investments
will lead shift in AD/AS curve.
Imagine that in the year 2022, China’s economy slows significantly, causing a decrease in demand for...
Imagine that in the year 2022, China's economy slows significantly, causing a decrease in demand for US exports. Use the AD/AS model to explain the likely short run impacts on U.S. GDP and the aggregate price level. What do you anticipate will happen to U.S. consumption expenditure and U.S. employment? Please explain your reasoning for each of your predictions and show graphically as appropriate. AD/AS model analysis Criteria Ratings Pts Criterion 1 4.0 pts 2.0pts 0.0 pts 3.0 pts Proficient...
Imagine that in the year 2022, China's economy slows significantly, causing a decrease in demand for US exports. Use the AD/AS model to explain the likely short run impacts on U.S. GDP and the aggregate price level. What do you anticipate will happen to U.S. consumption expenditure and U.S. employment? Please explain your reasoning for each of your predictions and show graphically as appropriate. AD/AS model analysis Criteria Ratings Pts Criterion 1 4.0pts 0.0 pts 3.0 pts 20pts Distinguished Proficient...
The COVID-19 pandemic and the US-China trade tension have caused a significant decrease in China's demand for US exports. Use the AD/AS model to explain the likely short run impacts on U.S. GDP and the aggregate price level. What do you anticipate will happen to U.S. consumption expenditure and U.S. employment? Please explain your reasoning for each of your predictions and show graphically as appropriate.
Draw a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium. a. Assume that there is a large increase in demand for U.S. exports. Show the resulting short-run equilibrium on your graph. In this short-run equilibrium, is the unemployment rate likely to be higher or lower than it was before the increase in exports? Briefly explain. Explain how the economy adjusts back to long-run equilibrium. When the economy has adjusted back to...
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...
Suppose a decrease in aggregate demand shifts the economy from equilibrium to P4 and Y1. LRAS Price Level AD Y Y* Real GDP a. Which of the following events would likely cause the decrease in aggregate demand? Personal consumption falls as workers become concerned about future employment prospects. Gross Investment Increases as capital units become fully utilized. Imports decrease due to Increased foreign prices b. A decrease in aggregate demand is of policy concern due to the increase in the...
ONLY 5-11 BELOW A5-10. Suppose the following aggregate expenditure model describes an economy: C = 100 + (5/6)Yd T = (1/5)Y I = 200 G = 400 X = 300 IM = (1/3)Y where C is consumption, Yd is disposable income, T is taxes, Y is national income, I is investment, G is government spending, X is exports, and IM is imports. (a) Derive a numerical expression for aggregate expenditure (AE) as a function of Y. Calculate the equilibrium level...
The figure below depicts the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), 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, stress the importance of aggregate supply. Others see the return to long-run equilibrium as an...
The latest figures show that Thailand’s economy grew by 3.5% in the second quarter, putting it on track for 3–3.5% growth for the whole of 2016. Thailand has managed to boost its growth after several quarters of disappointing performance by increasing public sector investment in several large infrastructure projects, including roads, railways and airports. These projects will run over the next 3 to 5 years and are worth several hundred billion baht, Thailand’s currency. It is hoped that this public...
Question 1 (20 marks) The recent global outbreak of Covid-19 has major economic consequences. Using the AS-AD model, show what will be short-term impact of this crisis on the AIRLINE INDUSTRY Discuss some reasons why this impact may happen. b. Bank of Canada has already taken Fiscal and Monetary policy measures to stabilize the economy during the time of this outbreak. What actions has it take in terms of Fiscal Policy? In terms of Monetary Policy? (Provide specific details, Use...