Assume initially that the economy is in equilibrium in the long run. Next, suppose investors' confidence in the future drops (they expect profits to decline in the future). a. Explain (using a graph) the effects of this shock on aggregated request, the price level, real GDP and aggregated offer in the short run. b. Suppose the government takes no action and investor confidence remains low. What kinds of adjustments happen over the long term? to the price level, real GDP, DA and OA during this adjustment period, illustrating the changes on your graph. Explain what happens

Assume initially that the economy is in equilibrium in the long run. Next, suppose investors' confidence in the future drops (they expect profits to decline in the future). a. Explain (using a graph) the effects of this shock on aggregated request, the price level, real GDP and aggregated offer in the short run. b. Suppose the government takes no action and investor confidence remains low. What kinds of adjustments happen over the long term? to the price level, real GDP, DA and OA during this adjustment period, illustrating the changes on your graph. Explain what happens

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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