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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On the graph, label your starting AD line as AD 2019. Draw a new AD line showing the change to AD due to the pandemic. Label your starting SRAS line as SRAS 2019. Draw a new SRAS line showing the change to supply due to the pandemic.Label the new short-run equilibrium RGDP and Price Level. Does output (i.e. RGDP) increase or decrease in your model? Does the price level increase or decrease in your model? According to the AD-AS model when RGDP falls the unemployment rises and vice versa. Does your graph indicate an increase or decrease in the unemployment rate
Use the following graph to answer the next question. Price Level P2 AS AD 2 Y₁ Y2 Real GDP AD₁ Y3 If aggregate demand curve shifts from AD2 to AD1, the effect on real GDP wilt be a decrease from Multiple Choice Y3 to Y4. Y3 to Y1. Y2 to Y1. O Y2 to Y4. @ 29 N #3 $ > MacBook Pro % &
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Consider the orginal IS-curve. Suppose demand in the U.S. for imports from Japan increases. This leads to what? Select all the correct statements. (a) Lower short - run output in the U.S.. (b) A downward shift in the IS - curve in Japan. (c) A positive aggregate demand shock in Japan. (d) An upward shift in the IS - curve in the U.S.. (e) A movement along the IS-curve in Japan.
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Solutions for c,d and e
a. Beginning with long-run equilibrium, use the aggregate demand (AD) and aggregate supply (AS) model to explain (and illustrate) what happens in the short run when the economy suffers a negative supply shock. Be sure to detail what happens to aggregate demand, aggregate supply, the price level, the level of GDP, and unemployment.
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