Consider the AD/AS model. In the long run, after factor prices have fully adjusted to any output gaps, real GDP A. and the price level are determined by "long-run aggregate supply." B. and the price level are determined by aggregate demand. C. is determined by potential output and the price level by aggregate demand. D. is determined by aggregate demand and the price level by potential output. E. is determined by AD and the price level is determined by the AS curve.

Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of a increase in government spending and an increase in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis. With diagrams

Assume that an economy is initially operating at the natural rate of output (full employmentoutput). Use the AD-AS model to illustrate graphically the effects on price and output of areduction in government spending. Explain your assumptions with respect to the range ofaggregate supply of your analysis.

Consider the AD-AS model below. The economy is in long-run equilibrium at point in period 1. Consider an increase in government spending. If the public has rational expectations, the economy will move to point If the public has adaptive expectations, the economy will move to point . In period 3 the AS will pass through point In the long run the AS will move to point

18. Use the AD/AS model to illustrate the following. Draw 6 graphs by hand. Show how the AD or the AS curve shift and in what direction (left or right). Also state what happens to equilibrium real GDP (Y), employment, and the equilibrium price level. [Note: Use the SRAS curve, not the LRAS.] a. an increase in government spending and/or transfer payments b. restrictive fiscal policy c. expansive monetary policy d. increase in investment according to Keynesians e. increase in investment according to supply-side economists f. a stock market crash

In an effort to boost output, the government passes a large fiscal stimulus that raises government spending by $1 trillion. Use the AD-AS framework to predict how prices and output change in the very short run, in the short run, in the medium run, and in the long run.

What effects would each of the following have on aggregate demand or each case use a diagram to show the expected effects on the equilibrium price level and level of real output. Assume that all other things remain constant. aggregate supply? In a. A widespread fear of depression on the part of consumers. AD curve (right, left), output (up, down) and price level (up, down) (assuming no ratchet effect). b. The expectation of rapid inflation. AD curve (right, left), output (up, down) and price level (up, down). с. A sizable increase in labor productivity (with no change in nominal wages). AS curve (right, left), output (up, down) and price level (up, down). d. Depreciation in the international value of the dollar. AD curve (right, left) (increased net exports); AS curve (right, left) (higher input prices)

1. Discuss what factors shift the LRAS curve to the right (what increases long run aggregate supply). 2. Explain the following shifts by using the LRAS-AD diagram : a) Increase in both equilibrium real GDP and price level. b) A decrease in equilibrium real GDP and an increase in price level.

Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?

On the graph, label your starting AD line as AD 2019.  Draw a new AD line showing the change to AD due to the pandemic. Label your starting SRAS line as SRAS 2019.  Draw a new SRAS line showing the change to supply due to the pandemic.Label the new short-run equilibrium RGDP and Price Level.   Does output (i.e. RGDP) increase or decrease in your model? Does the price level increase or decrease in your model? According to the AD-AS model when RGDP falls the unemployment rises and vice versa.  Does your graph indicate an increase or decrease in the unemployment rate