Describe the full employment macroeconomic equilibrium in the As-AD model. what would happen on the AS-AD model of the government put forward and pass 2 trillion dollarinfrastructure plan?what has happened to the equilibrium output and price level ?what gap would be created ?how does the economy respond to this gap? what has happened to the equilibrium output and price level due to part five?

Describe the full employment macroeconomic equilibrium in the As-AD model. what would happen on the AS-AD model of the government put forward and pass 2 trillion dollarinfrastructure plan?what has happened to the equilibrium output and price level ?what gap would be created ?how does the economy respond to this gap? what has happened to the equilibrium output and price level due to part five?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 51CTQ: Suppose the level of structural unemployment increases. How would you illustrate the increase in...

See similar textbooks

Similar questions

Suppose the level of structural unemployment increases. How would you illustrate the increase in structural unemployment in the AD/AS model? Hint: How does structural unemployment affect potential GDP?
Suppose Chino is a closed economy. A large portion of the work force has joint astrong labor union. As such, the nominal wages of most workers are downwardrigid.Suppose most households lose their wealth in a recent clash of the stock market.How would the price and output level of Chino be affected in the short run?Explain by using the AD-AS model. Particularly, use the sticky-wage model ofaggregate supply to explain the magnitude of the effects on price and output.
Describe the full employment macroeconomic equilibrium in the ASAD models?
What is the condition of the U.S. economy now (phase of business cycle, GDP growth rate, unemployment rate, inflation rate)? What actions have the U.S. government taken? What are the impacts of these actions in an AD-AS framework?
Assume an economy is initially operating at the natural rate of output. a. Draw an AD-AS model. Label the initial equilibrium point as point A. Use the model to illustrate graphically the short-run effects on price and output when the world oil price suddenly increases. Label the new equilibrium as point B. b. What happens to inflation and unemployment in the short run? c. Label in your diagram the long-run equilibrium point if the economy recovers on its own. Name it Point C. d. What monetary policy should the Fed use to help the economy recover in the short run? Label the equilibrium point in your diagram if the Fed took the proposed action. Name it Point D.
Use the AS-AD model to analyze the impact on the U.S. economy as a result of each of the listed events. Mention if AD and/or AS shift and in which direction. Also explain what the country will experience with respect to increase or decrease in short-run equilibrium real GDP and increase or decrease in the equilibrium price level. For each event, assume that the economy is originally in a full- employment equilibrium, mention if in the new equilibrium there is a recessionary gap or an inflationary gap. A) Congress raises income taxes. B) The Federal Reserve decreases the target for the federal funds rate. C) Migration to the US increases the working- age population. DJ Appreciation in the international value of the dollar.
Assume an ecomy operates in the intermediate range of its aggregate supply curve. State the direction of shif for the aggregate demand curve or aggregate supply curve for each of the following changes in conditions. What is the effect on the price level? On real GDP? On employment?
n the AD-AS model, assume that an economy’s aggregate demand, denoted by QD=400−P, and SR aggregate supply, denoted by QS=P, currently intersect at price level = $200 and the full employment output level = 200. What curve would have shifted if a new short-run equilibrium were to occur at an output level of 300 and a price level of $300? Group of answer choices SRAS shifts leftward. AD shifts leftward. SRAS shifts rightward. AD shifts rightward.
In a recent press conference of the Federal Reserve of the United States2, Chairman Powellincluded the following as part of the description of the economic situation in the US: “Bottlenecks and supply chain disruptions are limiting how quickly production can respond to the rebound in demand in the near term. As a result, overall inflation is running well above our 2 percent longer-run goal.” How can this situation be represented by the AD-AS framework (i.e. how have AD and AS curves shifted?) If the bottlenecks and supply chain disruptions are just temporary, what are expected to happen?
Brent, the international oil marker, hit US$130 a barrel on 8th March 2022. The oil price is close to 90 per cent above their level at the same point in time last year. Suppose that the rise in oil price is permanent. It creates an inflation shock and, at the same time, reduces potential output. With the aid of AD-AS model, show the difference in the effects of the oil price increase on output and the inflation rate in the long run if the government does not engage in stabilization policy and if the government does engage in stabilization policy to keep the inflation level low. Please elaborate your answer verbally.
For each of the following events, draw an AS-AD diagram and explain the short-run effects on output and the price level. Assume that policymakers take no (other) actions. 1. The government increases cooperate tax. 2. Households decide to save a large share of their income. 3. Price of oil increases. At the same time, the government increases spending on military. 4. Price of oil increases. At the same time, the average wage increases in the U.S.
Use the basic AD-AS model to illustrate and describe the effect of unexpected increase in the oil prices on macroeconomic equilibrium output, price level and (un)employment in short-run. Additionally, also explain graphically, how the economy adjusts back to long-run equilibrium.