2. Suppose that a presidential candidate who promised large personal income tax cuts is elected.Use the AD-AS model to predict short-run changes in real GDP and the aggregate pricelevel.AggregatepricelevelESRPESRASShort-runmacroeconomicequilibriumADYEReal GDP

If people anticipate a large tax cut in the future, they may adjust their behavior in the present,…

Answered: 2. Suppose that a presidential…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

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Suppose Mexico, one of our largest trading partners and purchaser of a large quantity of our exports, goes into a recession. Use the AD/AS model to determine the likely impact on our equilibrium GDP and price level.
Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
What impact would a decrease in the size of the labor force have on GDP and the puce level according to the AD/AS model?
If the economy is operating in the neoclassical zone of the SRAS curve and aggregate demand falls, what is likely to happen to teal GDP?
The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
How is long-term growth illustrated in an AD/AS model?
Suppose the U.S. Congress passes significant immigration reform that makes it more difficult for foreigners to come to the United States to work. Use the AD/AS model to explain how this would affect the equilibrium level of GDP and the puce level.
Many financial analysts and economists eagerly await the press releases for the reports on the home price index and consumer confidence index. What would be the effects of a negative report on both of these? What about a positive report?
How is recession illustrated in an AD/AS model?
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
Are Says law and Keynes law necessarily mutually exclusive?
How is pressure for inflationary price increases shown in an AD/AS model?

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2. Suppose that a presidential candidate who promised large personal income tax cuts is elected. Use the AD-AS model to predict short-run changes in real GDP and the aggregate price level. Aggregate price level ESR PE SRAS Short-run macroeconomic equilibrium AD YE Real GDP