Assume the economy of Germany is in a long run equilibrium with full employment. Draw a correctly labeled graph of short run aggregate supply, long run aggregate supply, and aggregate demand. Show each of the following Equilibrium output, labeled Y1. Equilibrium price level, labeled PL1 2. Suppose that there is a significant boom in the German stock market, causing all stocks to increase in value by 15%. On your graph in part A, show the effect this will have on the equilibrium in the short run, labeling the new equilibrium output and price level Y2 and PL2, respectively. 3. Using a correctly labeled graph of the Phillips Curve, show how this change will affect the economy. 4. What two fiscal policy options does the federal government have to fix the market imbalance? Explain how each would affect the economy.
Assume the economy of Germany is in a long run equilibrium with full employment.
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Draw a correctly labeled graph of short run
aggregate supply , long run aggregate supply, and aggregate demand. Show each of the following
-
Equilibrium output, labeled Y1.
-
Equilibrium price level, labeled PL1
2. Suppose that there is a significant boom in the German stock market, causing all stocks to increase in value by 15%. On your graph in part A, show the effect this will have on the equilibrium in the short run, labeling the new equilibrium output and price level Y2 and PL2, respectively.
3. Using a correctly labeled graph of the
4. What two fiscal policy options does the federal government have to fix the market imbalance? Explain how each would affect the economy.
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