IV. Consider an economy with output equal to the natural level of output. Now suppose there...
IV. Consider an economy with output equal to the natural level of output. Now suppose there is an increase in unemployment benefits.
a. Show the effects of an increase in unemployment benefits on the position of the AD and AS curves in the short run and in the medium run.
b. How will the increase in unemployment benefits affect output and the price level in the short run and in the medium run?
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IV. Consider an economy with output equal to the natural level
of output. Now suppose there...
Economics chart The following graph shows the economy in long-run equilibrium at the price level of...
Economics chart The following graph shows the economy in long-run equilibrium at the price level of 120 and potential output of $300 billion. Suppose several foreign economies experience severe recessions, causing foreign purchases of domestic goods and services to decline sharply. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic turmoil abroad. Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if...
8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected...
8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the increase in government spending. In the short run, the increase in government spending on infrastructure causes the price level to _______...
For this question, assume that the economy is initially operating at the natural level of output....
For this question, assume that the economy is initially operating at the natural level of output. A reduction in taxes will cause: A) an increase in the real wage in the medium run. B) a reduction in the real wage in the medium run. C) no change in the nominal wage in the medium run. D) ambiguous effects on the real wage in the medium run.
The following graph shows the economy in long-run equilibrium atthe expected price level of 120...
The following graph shows the economy in long-run equilibrium at
the expected price level of 120 and the natural level of output of
$600 billion. Suppose a sudden and severe contraction in the
housing market reduces the value of homes and causes consumers to
spend less.Shift the short-run aggregate supply (AS) curve or the aggregate
demand (AD) curve to show the short-run impact of
the housing market slump.In the short run, the decrease in consumption spending
associated with the housing...
1. Consider an economy with zero interest rate and aggregate output less than its natural output...
1. Consider an economy with zero interest rate and aggregate output less than its natural output (liquidity trap). a. Draw IS-LM curves representing this economy. b. Draw AD-AS curves representing this economy. c. Explain why the price adjustment mechanism (wage and price changes) does not work in this condition. d. What type of policy (fiscal/monetary) is needed to reduce unemployment rate and increase output? Show on the graphs. f. Do you think that the policy packages in response to the...
8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the e...
8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. In the short run, the increase in consumption spending associated with the stock market expansion causes the...
The following graphs show the state of an economy that is currently in long-run equilibrium.
3. The long-run effects of monetary policy The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC).Which of the following statements are true based on these graphs? Check all that apply The natural level of output is $3 trillion. The unemployment rate is currently 6% higher than the natural rate of unemployment. The...
3. Suppose the economy originally operates at medium run equilibrium. Now, consumer confidence su...
3. Suppose the economy originally operates at medium run equilibrium. Now, consumer confidence suddenly increased. a) In ISLM and ADAS diagrams, show the effect of the increase in consumer confidence in the short run and in the medium run, on output, nominal interest rate, and price level. Briefly explain the shift of curves. b) Based on your answer in (a), explain what happens to private savings in the short run. (Hint: S=Y-T-C=Y-T-c0-c1(Y-T)= -c0+(1-c1)(Y-T) ) c) What happens to private savings...
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. suppose firms become pessimistic about future business conditions and cut back on investment spending. shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism.
8) Consider an economy in long-run equilibrium with an inflation rate () of 0.08 per year and a natural unemployment rate of 0.05. Suppose Okun's law holds and a one percentage point unemplo...
8) Consider an economy in long-run equilibrium with an inflation rate () of 0.08 per year and a natural unemployment rate of 0.05. Suppose Okun's law holds and a one percentage point unemployment rate reduces real output by 2% of full-employment output. The expectation-augmented Phillips curve is givep by increase in the т . ne . 2.5 (u-005). Consider a two distr maErTTelintyear,π .006 and me . 008. In the second year, π.004 and㎡. (a) In the first year, what...
The following graph shows the economy in long-run equilibrium at
the expected price level of 120 and the natural level of output of
$600 billion. Suppose a sudden and severe contraction in the
housing market reduces the value of homes and causes consumers to
spend less.Shift the short-run aggregate supply (AS) curve or the aggregate
demand (AD) curve to show the short-run impact of
the housing market slump.In the short run, the decrease in consumption spending
associated with the housing...
1. Consider an economy with zero interest rate and aggregate output less than its natural output (liquidity trap). a. Draw IS-LM curves representing this economy. b. Draw AD-AS curves representing this economy. c. Explain why the price adjustment mechanism (wage and price changes) does not work in this condition. d. What type of policy (fiscal/monetary) is needed to reduce unemployment rate and increase output? Show on the graphs. f. Do you think that the policy packages in response to the...
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. suppose firms become pessimistic about future business conditions and cut back on investment spending. shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism.
8) Consider an economy in long-run equilibrium with an inflation rate () of 0.08 per year and a natural unemployment rate of 0.05. Suppose Okun's law holds and a one percentage point unemployment rate reduces real output by 2% of full-employment output. The expectation-augmented Phillips curve is givep by increase in the т . ne . 2.5 (u-005). Consider a two distr maErTTelintyear,π .006 and me . 008. In the second year, π.004 and㎡. (a) In the first year, what...
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