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Consider a baseline long run equilibrium where output is 22 trillion dollars, and the price level is 100. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium. • Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant)

Consider a baseline long run equilibrium where output is 22 trillion dollars, and the price level is 100. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium. • Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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3Consider a baseline long run equilibrium where output is 22 trillion dollars, and the price level is 100. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium.
• Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant)

 

**Step 5)** Now that your Keynesian Colleague has proposed a massive expansionary fiscal policy, do you think it will work as an in-built stabilizer (i.e., return the economy back to a long run: would it stop market adjustment? )? Are there policies that you will propose as a Classical Macroeconomist that is distinct from your Keynesian Colleague's proposal?
Transcribed Image Text:**Step 5)** Now that your Keynesian Colleague has proposed a massive expansionary fiscal policy, do you think it will work as an in-built stabilizer (i.e., return the economy back to a long run: would it stop market adjustment? )? Are there policies that you will propose as a Classical Macroeconomist that is distinct from your Keynesian Colleague's proposal?
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