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Unit 8 Answers

Satisfactory Essays

Unit 8 Answers 1) Long-run Macroeconomic Equilibrium and Stock Market Boom Let us assume the economy reaches its long-run macroeconomic equilibrium in 2020. When the economy is in the long run macroeconomic equilibrium, the stock market will also reach its boom. This will in turn lead to increases in stock prices more than expected, and the stock prices will stay high for some period. Answer the following questions based on the scenarios of long macroeconomic equilibrium and consequent stock market boom. a) Which curve will shift? Is it AS curve or AD curve? In which direction does the shift occur? The aggregate demand curve will shift right b) In the short-run, what will happen to the price level and output (real GDP)? In the …show more content…

Thus the aggregate supply goes down triggering a decline in employment levels. This in turn, makes consumers cautious spenders and they tend to save rather than spend resulting in decline in the aggregate demand one of the factors to cause the upward spite is the war. 5) Assume there are short-run and long-run Macroeconomic Equilibriums in the economy. Refer to the AS and AD curves above to answer the following questions. a) What is the initial point of the long-run macroeconomic equilibrium? What are the equilibrium values? What does the appearance of the long-run aggregate-supply (LRAS) curve indicate? How does it differ from AS? The long-run equilibrium of the economy is found where the aggregate-demand curve crosses the long-run aggregate-supply curve (point A). When the economy reaches this long-run equilibrium, the expected price level will have adjusted to equal the actual price level. As a result, the short-run aggregate-supply curve crosses this point as well. b) What are the factors that can shift short-run aggregate supply curve from AS1 to AS2? What does Point A represent in the graph? What does point B represent? Is it the short-run or long-run macroeconomic equilibrium? Explain. Shifts in the AS curve can be caused by the following factors: changes in size & quality of the labor force available for production, changes in size & quality of capital stock through investment, technological progress

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