(a)
Identify the main features of the U.S economy in the second quarter of 2017.
(b)
Identify if the U.S. economy has a recessionary gap of inflationary gap in 2017.
(c)
Illustrate the Figure to show the changes in aggregate demand and
(d)
Illustrate Figure using the aggregate demand and aggregate supply model to show the changes in aggregate demand and aggregate supply when economy resorted its full employment.
(e)
Illustrate Figure using the aggregate demand and aggregate supply model to show the changes in aggregate demand and aggregate supply when the government increased expenditure on goods and services to restore its full employment.
(f)
Illustrate Figure using the aggregate demand and aggregate supply model to show the changes in aggregate demand and aggregate supply in short-run and long-run when the economy moved into an inflationary gap.
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EBK MACROECONOMICS
- If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.arrow_forwardFigure 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…arrow_forwardCreate a graph that shows where Mexico currently is on the business cycle. Be sure to include an AD-AS Model graph that shows if the economy is currently experiencing a recessionary gap, expansionary gap, or long run equilibrium.arrow_forward
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- Hello Can you help me out. 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 crasharrow_forwardDraw an AD-SRAS diagram, where the economy is initially at equilibrium and input prices do not move as quickly as output prices. Imagine a shock hits the economy, and after the shock you see in the data that the inflation rate has decreased in the economy while output has increased. What could have caused the shock? An increase in government spending. An increase in the capital stock An increase in inflation expectations An increase in importsarrow_forwardAggregate Demand and Aggregate Supply - End of Chapter Problems 10. There were two major shocks to the U.S. economy in 2007, leading to the severe recession of 2007-2009. One shock was related to oil prices; the other was the slump in the housing market. In the accompanying graph, shift the AD and/or SRAS curves and move the equilibrium point to its new position to show the effects of the following two shocks on GDP in the AD-AS framework. a. Data taken from the Department of Energy indicate that the average price of crude oil in the world increased from $54.63 per barrel on Jan. 5, 2007, to $92.93 on Dec. 28, 2007. b. The Housing Price Index, published by the Office of Federal Housing Enterprise Oversight, calculates that U.S. home prices fell by an average of 3% in the 12 months between January 2007 and January 2008. c. As a result of the two shocks, real GDP decreased price level increased , whereas the aggregate Aggregate price level Incorrect E [1] Real GDP SRAS ADarrow_forward
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