2) Suppose a country begins in full equilibrium in the AS-AD model at point A: LEAS SRAJ * 1 The country has a large agricultural sector this could be a developing country where agriculture still has substantial weight in GDP. The country relies on a large dam for much of the water supply it uses for irrigation. A serious accident damages the dam. The water flow will be substantially curtailed for years. a) Use your diagram to illustrate the effect of the accident on the economy in the long run. Make any assumptions you think are necessary. b) You are a central banker in this country. What are your concerns? Do you worry about YR? About P? If you were to adopt policies to address these concerns, is there a tradeoff in terms of dealing with these two? Illustrate with your figure.
2) Suppose a country begins in full equilibrium in the AS-AD model at point A: LEAS SRAJ * 1 The country has a large agricultural sector this could be a developing country where agriculture still has substantial weight in GDP. The country relies on a large dam for much of the water supply it uses for irrigation. A serious accident damages the dam. The water flow will be substantially curtailed for years. a) Use your diagram to illustrate the effect of the accident on the economy in the long run. Make any assumptions you think are necessary. b) You are a central banker in this country. What are your concerns? Do you worry about YR? About P? If you were to adopt policies to address these concerns, is there a tradeoff in terms of dealing with these two? Illustrate with your figure.
Chapter20: Exchange Rates And The Macroeconomy
Section: Chapter Questions
Problem 1DQ
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![PDFps9.pdf
2
of 3
+
File | C:/Users/Wiam/Downloads/ps9.pdf
Q
LRAS
2) Suppose a country begins in full equilibrium in the AS-AD model at point A:
P
1
W
A
SRAJ
T
*
בר
The country has a large agricultural sector this could be a developing country where
agriculture still has substantial weight in GDP. The country relies on a large dam for
much of the water supply it uses for irrigation. A serious accident damages the dam.
The water flow will be substantially curtailed for years.
a) Use your diagram to illustrate the effect of the accident on the economy in the long
run. Make any assumptions you think are necessary.
b) You are a central banker in this country. What are your concerns? Do you worry
about YR? About P? If you were to adopt policies to address these concerns, is there
a tradeoff in terms of dealing with these two? Illustrate with your figure.
3) Suppose that the country in the problem above the one that suffers from the dam
accident is a Malthusian economy. That is, assume the Malthusian model holds (e.g.,
you could assume the country is entirely rather than primarily agricultural). Assume
that in this case, the accident is permanent the damage to the water supply will last
forever. Use a diagram to illustrate the consequences of this in the Malthusian model.
J
>
50
ENG
ا
الى
60
@
6:22 PM
12/6/2022
X
:
o
+
+](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa44084f1-938e-436c-8756-12ac0f2df008%2F32e5ccfa-679b-4b8d-b216-cc44a84ce7b4%2Flyvlvip_processed.png&w=3840&q=75)
Transcribed Image Text:PDFps9.pdf
2
of 3
+
File | C:/Users/Wiam/Downloads/ps9.pdf
Q
LRAS
2) Suppose a country begins in full equilibrium in the AS-AD model at point A:
P
1
W
A
SRAJ
T
*
בר
The country has a large agricultural sector this could be a developing country where
agriculture still has substantial weight in GDP. The country relies on a large dam for
much of the water supply it uses for irrigation. A serious accident damages the dam.
The water flow will be substantially curtailed for years.
a) Use your diagram to illustrate the effect of the accident on the economy in the long
run. Make any assumptions you think are necessary.
b) You are a central banker in this country. What are your concerns? Do you worry
about YR? About P? If you were to adopt policies to address these concerns, is there
a tradeoff in terms of dealing with these two? Illustrate with your figure.
3) Suppose that the country in the problem above the one that suffers from the dam
accident is a Malthusian economy. That is, assume the Malthusian model holds (e.g.,
you could assume the country is entirely rather than primarily agricultural). Assume
that in this case, the accident is permanent the damage to the water supply will last
forever. Use a diagram to illustrate the consequences of this in the Malthusian model.
J
>
50
ENG
ا
الى
60
@
6:22 PM
12/6/2022
X
:
o
+
+
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