a. Sketch an AD/AS graph for the U.S. in both long-run and short-run equilibrium. b. On the U.S. AD/AS graph, demonstrate and explain what will happen if the Japanese economy experiences a recession. c. Given what you just demonstrated in b, explain why U.S. policy makers pay close attention to 'booms and busts' in foreign economies.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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9.
a. Sketch an AD/AS graph for the U.S. in both long-run and short-run equilibrium.
b. On the U.S. AD/AS graph, demonstrate and explain what will happen if the
Japanese economy experiences a recession.
c. Given what you just demonstrated in b, explain why U.S. policy makers pay close
attention to 'booms and busts' in foreign economies.
d. Explain and demonstrate on your graph how the U.S. economy will return to both
short-run and long-run equilibrium if the government uses countercyclical fiscal policy.
Be sure to explain the specific fiscal policies the government would use.
Transcribed Image Text:9. a. Sketch an AD/AS graph for the U.S. in both long-run and short-run equilibrium. b. On the U.S. AD/AS graph, demonstrate and explain what will happen if the Japanese economy experiences a recession. c. Given what you just demonstrated in b, explain why U.S. policy makers pay close attention to 'booms and busts' in foreign economies. d. Explain and demonstrate on your graph how the U.S. economy will return to both short-run and long-run equilibrium if the government uses countercyclical fiscal policy. Be sure to explain the specific fiscal policies the government would use.
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