Classify each of the following as a supply shock or ademand shock. Use a graph to show the effects on inflation and output in the short run and in the long run.a. Financial frictions increase.b. Households and firms become more optimistic aboutthe economy.c. Favorable weather produces a record crop of wheatand corn in the Midwest.d. Auto workers go on strike for four months.

Q: Which of the following would cause the price level to rise and output to fall in the short run? a.…

A: A Short-run supply is described as the present supply given a business's capital expenses on fixed…

Q: What is the difference between a recession and a depression? A. A depression is the opposite of a…

A: Business cycle refers to the fluctuations in economic activity. It includes expansion and recession.…

Q: An increase in aggregate demand will cause the unemployment rate to _______, the GDP growth rate to…

A: Aggregate demand refers to the total demand for goods and services in the economy by all the…

Q: c. If monetary and fiscal policy do not react to the​ shock, which of the following best describes…

A: Inflation is the rate at which the general level of prices for goods and services rises, resulting…

Q: In response to a decrease in interest rates, would the following things be smaller, larger, or no…

A: A decrease in interest can have substantial effects on the macroeconomic aggregates. Given below are…

Q: Real interest rates tend to ________ during the recession phase of the business cycle and ________…

A: "Business cycle measures the fluctuations in the economy over time." There are four stages in the…

Q: What makes the 2007-2009 recession special?  1. because of the length of the recession 2. because of…

A: Great recession and the causes is complex and involve several forces.

Q: In the long run,   a. the natural rate of unemployment depends primarily on the level of aggregate…

A: Philip’s curve describes the relationship between the unemployment rate and the inflation rate.…

Q: In the late 1960s, Milton Friedman and Edmund Phelps argued that a. the trade-off between…

A: Edmund Phelps and Milton Friedman separately confronted the basic concepts at the peak of the…

Q: A worldwide drought has reduced food production. Inflation has increased, unemployment has risen…

A: Note :In this I represent inflation and U represents unemploymentIt can be defined as the graphical…

Q: If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate…

A: Answer to the question is as follows :

Q: In the following examples, is inflation creating winners and losers at no net cost to the economy or…

A: Inflation implies a consistent elevation in the general price level of goods and services. Commonly…

Q: Question 5 • Consider a baseline long run steady state equilibrium where output is 20 trillion…

A: Aggregate demand refers to the total demand of goods and services in an economy in a given period of…

Q: In the aftermath of the Great Recession, the Beveridge cuve in the US... A. ...has shifted to the…

A: The Beveridge curve is a graphical representation of the relationship between the unemployment rate…

Q: When there is a shock to the economy and GDP declines, how much of the decline is due to a change in…

A: Macroeconomics examines the working, composition, and dynamics of an economy. To comprehend and…

Q: If the economy is in long-term equilibrium and cost of energy for production increases, which of the…

A: The long-term equilibrium is determined where aggregate demand is equal to both the short-run and…

Q: An economy is initially in long-run equilibrium. Suppose an oil cartel breaks up, causing a…

A: When the oil cartel breaks up, the price of oil falls and it results in a positive supply shock.…

Q: A favorable supply shock occurs when: unions push wages up an oil cartel breaks up and oil prices…

A: A favorable supply shock is a sudden increase in supply that causes a rightward shift of the…

Q: For each of the following events, explain the short-run and long-run effects on output and the price…

A: I will show the effect of increased spending on national defense by using the AD-AS model.…

Q: For each of the following events, explain the short-run and long-run effects on output and the price…

A: Short run is the time period when both fixed costs and variable costs are operational. In the long…

Q: Which of the following events is most responsible for the Great Recession of 2007 to 2009? Select an…

A: "Recession is a prolonged period of economic downturn." When recession occurs economic variables…

Q: Long-run aggregate supply is the level of output given by a. price stickiness b. aggregate demand…

A: Long-run aggregate supply curve represented by a vertical line.  When the short-run aggregate demand…

Q: Assume that the U.S. economy is currently operating in long-run equilibrium. A. Draw a correctly…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub parts for…

Q: You are asked to estimate the demand curve for Lake Mead recreational area by Las Vegas residents.…

A: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the…

Q: . Fiscal and Monetary policy actions in the short run. Take an example 2. Changes in the AD-AS…

A: The government can use expansionary or contractionary fiscal policy to change aggregate demand.…

Q: Rational expectations believe that a. the government must change government spending and taxes…

A: Human Beings make rational decisions. They weigh the pros and cons of all situations and then take a…

Q: Consider the short run and the long run and then choose the statement that is correct.  A. The…

A: The money supply is a term you may or may not be familiar with. This refers to all of the liquid…

Q: The following table describes the aggregate demand curve, where real GDP is expressed as the percent…

A: Real GDP is the value of goods and services produced in an economy measured at constant price.…

Q: Assume that a country's economy is in short-run equilibrium and the actual unemployment rate is…

A: Note: As per the guidelines we will answer only three subparts. Please resubmit the question again…

Q: Half of American recessions since the early 1950s have been caused at least in part by rapid…

A: The rapid increase in oil prices have both macro and micro economic impacts on economy.  The macro…

Q: ) In the 1970's, the United States had slow growth and high inflation. Which kind of shock best fits…

A: Hello. Since you have posted multiple questions and not specified which question needs to be solved,…