Suppose the economy is initially at a long-run equilibrium. The Fed then increases the money supply. In the following three diagrams, assume the resulting inflation is unexpected.
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Suppose the economy is initially at a long-run equilibrium. The Fed then increases the money supply. In the following three diagrams, assume the resulting inflation is unexpected.
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- Startung trom keng run eaillium, itA suditen decrease en houtetd weath cnes a n AD thw coramy wiperience OA the same lee of pnces nd iower real GOP in the short run O higher pnces and lower real ODP the short. nn Oe. lower prles and lwe mal GOPhe shortrun a krwer ces and the same level of oDP n me shot runFor each of the three theories for the upward slopeof the short-run aggregate.supply curve, carefullyexplain the following:aA how the econom}' recovers from a recession andreturns to its long-run equilibrium without anypolicy interventionb. what determines the speed of that recoveryb. Shift the appropriate curve or curves to show the initial short-run adjustment. Then shift the appropriate curve or curves to show the long-run adjustment. Finally, place the points for short-run equilibrium and long-run equilibrium in their appropriate places. AD-AS Model LRAS Long-run equilibrium Short-run equilibrium SRAS AD Income, Output, Y Price Level, P
- Which is NOT neutral in the long run? O output O aggregate demand O money real interest ratesSRAS, A SRASO SRAS2 D E AD Y Y 1. Assume that the economy starts at point A and there is a drought that severely reduces agricultural output in the economy for just one year. In this situation, point represents the short-run equilibrium immediately following the drought and represents the eventual long-run equilibrium. point а. D;A b. E;D c. B;C d. B;Ahow can a firm mantain a smooth production schedule even when sales are fluctuating? what are the benefits of a smooth production schedule? what are the costs?
- Given the following aggregate aggragate supply šchedule.() Price level Real GDp Deman ded Real GDP Supplied Short-RuN 70 80 90 100 110 450 400 350 300 350 400 450 500 250 350 4 the potential RGDP iŷ 450 units of us¢o 4) Draw and Show the short-run economic equilibrium and evaluate the situation by comparing with the long (hAs)explain this sifuation. geyate suppy (LAS) run aggregeafe plain ttis situationPlease no written by hand solution Consider a scenario of a closed economy in the short run where price level is fixed. Assume that bothtaxes and money supply increase in a way that keep output constant in equilibrium (suppose that themarginal propensity to consume is less than one). Which of the following may result from the policychange?a) It will lead to an increase in investment but a decrease in consumption.b) It will result in an increase in investment but a decrease in government spending.c) It will lead to an increase in investment and private saving.d) It will decrease investment but increase in public saving.Movement of Labor and Capital Between Countries In the short-run specific-factors model, consider a decrease in the stock of land. For example, suppose a natural disaster decreases the quantity of arable land used for planting crops. a. Demonstrate a change in the supply of land on the accompanying diagram. b. New equilibrium wage: c. New quantity of agricultural labor: d. The rental on capital will decrease increase remain the same Wage 20 19 18 17 16 15 14 13 12 11 10 9 8 7 0 5 4 3 2 1 0 P MPL A A MPL 01234 678 10 11 12 13 14 15 16 17 18 19 20 Labor
- Suppose that a simple economy consists of three sectors: Sector X, Y and Z. Given the input-output table below for the 3 sectors. Sector X Sector Y Sector Z External Demand Sector X 0.4 0.6 72 Sector Y 0.4 0.3 0.2 150 Sector Z 0.1 0.4 58a-bR,-r)f there is no demand shock and if b 2 and X=0.5, a 1 percent increase in the real interest Consider the IS curve 1-X rate will cause short-run output to OA. fall by 4 percent. OB. fall by 2 percent. OC. fall by 0.5 percent. OD.rise by 2 percent. O E. rise by 4 percent. LG U.S.ARMY 1HARINA BUBEIM IN %24 3. O Completed 15 out of 20 Submit All Question 7 of 20 Suppose that employment processes change so that more human capital is required for a given task. The əsoddng for human capital will shift right, and the rate of return will O demand; increase supply; decrease O demand; decrease O supply; increase Show all 5:20 PM search 78°F ENG 12/9/2021 ins prt sc delete end 61 144 114 04 米 backspace lock 4. home enter 1 shift end 1413
