Project #41393 - economics

AS-AD Equilibrium

 

1) Draw an "aggregate supply-aggregate demand" diagram that shows an economy suffering from high levels of unemployment. Show the effects of the following events on theAggregate Demand curve.

            a) An increase in RGDP in Europe and Japan

            b) A decline in U.S. households’ expectations of their future income.

            c) A reduction in Medicaid and Medicare benefit levels.

            d) An increase in business expectations of future aggregate demand growth

e) An increase in government spending on military hardware

f) A sharp decline in the value of foreign currencies relative to the value of the $.

g) A sharp decline in the prices of real estate and existing residential housing.

h) A rise in the price level due to a sharp increase in the price of oil.

2) Explain carefully why an initial change in aggregate demand will shift the aggregate demand function by a multiple of the initial change in output.

3) Suppose that two economies initially have the same level of real income and both suffer unanticipated declines in their sales of exports of $50 billion. Country “A” has higher tax rates and a higher level of government spending than economy “B”. Otherwise, the two economies are similar in every respect. Which country will suffer the greatest decline in employment as a result of the decline in exports? (Hint: think about multiplier effects and which country will have the higher multiplier!)

4) Agree or disagree and explain: “The Aggregate Demand for goods and services in an economy must at every moment equal the value of Real Gross Domestic Product because both are defined to be the sum of (C+I+G+X-IM).”

5) Can you think of a reason why economists attempting to forecast short run future changes in real GDP and employment look closely at data on business inventories and unfilled orders?

6) Agree or disagree and explain. "The AD schedule slopes downward because real income rises as the price level declines and everybody buys more as their real income rises."

 

7)

a) First depict on a graph an economy in a long-run equilibrium.
b) Then suppose that consumers become more pessimistic about the future of the economy and so they become more cautious in their expenditures. For this reason AD then shifts to the left. Show on your graph the new short-run equilibrium. Is unemployment lower than NAIRU or not? Is output higher than potential output or not? 
c) Show a possible new long-run equilibrium and explain how the economy may adjust to it. 

Subject General
Due By (Pacific Time) 09/28/2014 05:00 pm
Report DMCA
TutorRating
pallavi

Chat Now!

out of 1971 reviews
More..
amosmm

Chat Now!

out of 766 reviews
More..
PhyzKyd

Chat Now!

out of 1164 reviews
More..
rajdeep77

Chat Now!

out of 721 reviews
More..
sctys

Chat Now!

out of 1600 reviews
More..
sharadgreen

Chat Now!

out of 770 reviews
More..
topnotcher

Chat Now!

out of 766 reviews
More..
XXXIAO

Chat Now!

out of 680 reviews
More..
All Rights Reserved. Copyright by AceMyHW.com - Copyright Policy