Hi I need the answer to the question below thank you 17Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeledand must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer.Canada is an open economy that is currently in a recessionary output gap.(a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following.(i) The current equilibrium real output and price level, labeled as Y1 and PL1,respectively(ii) Full-employment output, labeled Yf(b) The central bank and the government do not take any policy actions to close the output gap.(i) Explain how the economy will adjust to full employment in the long run.(ii) On your graph in part (a), show how the economy adjusts to full employment in the long run.(c) Suppose the Canadian government is unwilling to wait for the long-run adjustment process. The marginal propensity to consume is 0.8. The equilibrium realoutput is $500 billion and the full-employment output is $540 billion.(i) Calculate the minimum change and indicate the direction of change in government spending required to shift the aggregate demand curve by the amount ofthe output gap.(ii) Calculate the minimum change and indicate the direction of change in taxes required to shift the aggregate demand curve by the amount of the output gap.(d) Assume instead that the Canadian central bank takes actions to restore the economy to full-employment output by influencing investment spending. Draw acorrectly labeled graph of the money market, and show the effect of the actions taken by the central bank on the equilibrium interest rate.(e) Canada and Mexico are trading partners. Draw a correctly labeled graph of the foreign exchange market of the Canadian dollar, and show the effect of thechange in the interest rate in part (d) on the value of the Canadian dollar with respect to the Mexican peso.

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(a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following. (i) The current equilibrium real output and price level, labeled as Y1 and PL1, respectively (ii) Full-employment output, labeled Yf

(a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following. (i) The current equilibrium real output and price level, labeled as Y1 and PL1, respectively (ii) Full-employment output, labeled Yf

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hi I need the answer to the question below thank you

17
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled
and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer.
Canada is an open economy that is currently in a recessionary output gap.
(a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following.
(i) The current equilibrium real output and price level, labeled as Y1 and PL1,
respectively
(ii) Full-employment output, labeled Yf
(b) The central bank and the government do not take any policy actions to close the output gap.
(i) Explain how the economy will adjust to full employment in the long run.
(ii) On your graph in part (a), show how the economy adjusts to full employment in the long run.
(c) Suppose the Canadian government is unwilling to wait for the long-run adjustment process. The marginal propensity to consume is 0.8. The equilibrium real
output is $500 billion and the full-employment output is $540 billion.
(i) Calculate the minimum change and indicate the direction of change in government spending required to shift the aggregate demand curve by the amount of
the output gap.
(ii) Calculate the minimum change and indicate the direction of change in taxes required to shift the aggregate demand curve by the amount of the output gap.
(d) Assume instead that the Canadian central bank takes actions to restore the economy to full-employment output by influencing investment spending. Draw a
correctly labeled graph of the money market, and show the effect of the actions taken by the central bank on the equilibrium interest rate.
(e) Canada and Mexico are trading partners. Draw a correctly labeled graph of the foreign exchange market of the Canadian dollar, and show the effect of the
change in the interest rate in part (d) on the value of the Canadian dollar with respect to the Mexican peso.

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