Question

one big problem. thank you!!

Problem 3: AS-AD Relation Part II (20pts) AS-AD model can be used to explain how the economy transitions from the short-run to the medium-run 3a. (1pt) Can price be higher than expected price in the short run? 3b. (1pt) if P> Pe in the short run, what happens to Pe when we go from short-run to medium-run? 3c. (2pt) If Pe increases, would AD curve shift or would AS curve shift? How would it shift? d. (4pt) Answer this question graphically: in the short-run if price is higher than the expected price, i.e. P> Pe, would the short-run equilibrium output, Y, be higher or lower than the natural level of output, e. (4pt) Answer this question graphically. in the short-run if price is higher than the expected price, i.e. > Pe, how would the economy transition to the medium run equilibrium. How would P and Y change in is transition? (4pt) Answer this question graphically: if the economy starts with P- Pe and Y ort-run effect and medium-run effect of a monetary contraction? Yn, what are the (Apt) Answer this question graphically: if the economy starts with P- Pe and Y rt-run effect and medium-run effect of a fiscal expansion? Yn, what are the (3pt) Suppose A 1, m 0.2, z-1, and F(u, z)- z- u. Compute the equilibrium real wage and equilibrium employment rate.

Answer 1

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