The figure illustrates a dynamic aggregate demand aggregate supply model. Suppose the economy is in equilibrium in the first period at point A. In the second period, the economy reaches point B. We would expect the Fed to pursue what type of policy in order to move AD2 to AD2, policy and reach equilibrium (point C) in the second period? GDP deflator 113- 112- 110 LRAS₁ LRAS2 SRAS₁ SRAS2 AD2.(policy) AD1 AD2 17 17.3 17.4 Real GDP (trillions of 2012 dollars) Q ☑

The figure illustrates a dynamic aggregate demand aggregate supply model. Suppose the economy is in equilibrium in the first period at point A. In the second period, the economy reaches point B. We would expect the Fed to pursue what type of policy in order to move AD2 to AD2, policy and reach equilibrium (point C) in the second period? GDP deflator 113- 112- 110 LRAS₁ LRAS2 SRAS₁ SRAS2 AD2.(policy) AD1 AD2 17 17.3 17.4 Real GDP (trillions of 2012 dollars) Q ☑

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: An Introduction To Basic Macroeconomic Markets

Section: Chapter Questions

Problem 1CQ

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Consider a macro-economy that was initially at equilibrium. Using an aggregate demand and aggregate supply diagram model of the economy, graphically illustrate and discuss the short-run and long-run effectsof the following events upon the economy:(a) The imposition of a carbon tax upon local big polluting companies;(b) An appreciation in the foreign exchange rate value of the economy’s currency;(c) A major trading partner’s economy fall into recession;(d) The country’s main exports fall in price while the goods the country imports from abroad rise in price
illustrate graphically the effect of the following factors on the aggregate demand (AD) curve: a) Interest-rate increases when the economy is good. b) ringgit slumps due to the external factors.
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Figure 1: Hayek’s (Classical) AD-AS Model Economics Online. (n.d.). Aggregate Demand. Retrieved from http://economicsonline.co.uk/Managing_the_economy/Aggregate_demand.html Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? 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? Figure 2: Keynes’s AD-AS Model Economics Online. (n.d.). Aggregate supply. Retrieved from http://www.economicsonline.co.uk/Managing_the_economy/Aggregate+supply.html 2.1. In Figure 2 above, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation and recession? 2.2. In macroeconomics, the immediate short run is known as a length…
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A visual/graphic representation of how a decrease in consumer spending shifts the aggregate demand curve.
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