Construct an Aggregate Supply and Aggregate Demand model where AS and AD are in equilibrium at potential GDP at a price level of 110 and Real GDP of $13.0 trillion dollars. Be sure to label all parts of the graph. a. Graph the initial effects of a recession that causes AD to decrease and real GDP to fall $0.5 trillion. b. Explain what will happen in the long run if nothing is done. c. If the government wanted to intervene in the economy, explain the Fiscal Policy measures that can be used to bring real GDP back to potential.
Construct an Aggregate Supply and Aggregate Demand model where AS and AD are in equilibrium at potential GDP at a price level of 110 and Real GDP of $13.0 trillion dollars. Be sure to label all parts of the graph. a. Graph the initial effects of a recession that causes AD to decrease and real GDP to fall $0.5 trillion. b. Explain what will happen in the long run if nothing is done. c. If the government wanted to intervene in the economy, explain the Fiscal Policy measures that can be used to bring real GDP back to potential.
Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply
Section: Chapter Questions
Problem 1E
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- Construct an
Aggregate Supply and AggregateDemand model where AS and AD are in equilibrium at potentialGDP at aprice level of 110 and Real GDP of $13.0 trillion dollars. Be sure to label all parts of the graph.
a. Graph the initial effects of a recession that causes AD to decrease and real GDP to fall $0.5 trillion.
b. Explain what will happen in the long run if nothing is done.
c. If the government wanted to intervene in the economy, explain the Fiscal Policy measures that can be used to bring real GDP back to potential.
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ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
