An example of an investment boom that increased AD and LRAS is a. the 1970s oil price shock b. the 1980-82 recession c. the 1990s information technology boom d. the financial crisis that caused the Great Recession
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- Macroeconomic uncertainity and investment, discuss.Explain the effects of propensities, expectations and multipliers in causing a recession.Using graphical illustration of AS-AD framework, show the effects of following events on real output and price level in the economy. A. A wave of immigration increases the labor force.B. An earthquake destroys some of the capital stock. C. A technological advance improves the production. D. The government raises taxes by $100 billion. E. Government announces an interest rate cut to encourage business investment.
- Explain business response towards recessionary pressures in the economy.What were the causes and consequences of the Great Recession?9. Use an AD/AS model to show what happens if there is a) a decrease in consumption spending b) a decrease in the HST c) an incentive for businesses to increase labour productivity d) a decrease in interest rates e) an increase in government spending ANS: 10.Identify three leakages in the Canadian economy. ANS:
- What is more appropriate to help stimulate economic growth; consumption or investment demand? What sector do you think our economy should look at stimulating, consumers or businesses? Explain your reasoning using the concepts of aggregate demand and supply.Economics Explain what tendency does consumption smoothing refer to and why is it assumed in an intertemporal model?There are two theories regarding the cause of recessions. Between the two, which one contributes more to it? Explain thoroughly. Provide examples when necessary.
- Use the following graph to answer the questions that follow. The graph depicts an economy where aggregate demand has decreased. Note that long-run aggregate supply remains changed. Price level a LRAS AD₂ AD₂ The graph shows a decrease in the price level due to a decrease in aggregate demand. Real gross domestic product (GDP), however, does not change. If this were an accurate description of how an economy responds during a recession, which of the following would be an appropriate government response to a decrease in aggregate demand? Real GDP the government should make an effort to control prices and limit inflation. The government should attempt to stimulate short-run aggregate supply. 0 The government should take active steps to promote full employment. The government should let the economy adjust to full employment on its own. Ô The government should restrict international trade and immigration. AddressIn what direction will each of the following occurrences shift the investment demand curve, other things equal? a. An increase in unused production capacity occurs. b. Business taxes decline. c. The cost of equipment fall. d. Widespread pessimism arises about future business conditions and sales revenue. e. A major new technological breakthrough creates prospects for a wide range of profitable new products.Figure 1: Hayek’s (Classical) AD-AS Model 1.1. Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? 1.2. Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not? Figure 2: Keynes’s AD-AS Model 2.1. In Figure 2 above, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation and recession? 2.2. In macroeconomics, the immediate short run is known as a length of time when both input prices and output prices are fixed. In the short-run, input prices are fixed but output prices are variable. In the long run, input prices and output prices can vary. Describe the AS curve in the Immediate Short run. Describe the AS curve…
