1. Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the long-run aggregate supply, LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). What could be the unemployment rate if the natural rate of unemployment is 4%?
2. Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the long-run aggregate supply, LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). Assume that the present status of the economy is the result of a demand shock. What should be the original price level when the economy was in equilibrium
3. Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the long-run aggregate supply, LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). Assume that the present status of the economy is the result of a demand shock. What should be the price level when the labor market adjusts and the economy will be in an equilibrium?
1. Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the long-run aggregate supply, LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). What could be the unemployment rate if the natural rate of unemployment is 4%
in short run, SRAS = AD, gives P = 102
at p = 102, Yt = 0.3*102 = 30.6
therefore, Yt- Yn = 30.6 - 30 = 0.6
un = 4, so by okun's law, ut - un = (-)a.(Yt-Yn)
not knwoing the value of a, we have ut = (-)a.(Yt-Yn) + un = -0.6a + 4
ut = -0.6a + 4
Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the long-run aggregate supply, LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). Assume that the present status of the economy is the result of a demand shock. What should be the original price level when the economy was in equilibrium
in equilibrium, AD = LRAS
51 - 0.2P = 30
51-30 = 0.2P
P = 21/0.2 = 105
1. Aggregate demand curve of an economy is given by AD = 51 - 0.2P, the...
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