Please write on the space provided what happens to each variable -- indicate whether each variable increases, decreases, or remains unchanged. Please show in the graphs the initial equilibrium, short run equilibrium, and final long run equilibrium. If possible, please provide only two graphs, one for IS-LM and one for AD-AS that show all of the equilibrium positions Suppose the economy is initially in a long-run equilibrium. Starting from this position, assume that an exogenous shock such as the Covid 19 pandemic pushes the economy away from the equilibrium. Using the IS-LM and AD-AS framework, indicate what happens in the short run to output, unemployment, prices, interest rate, consumption, investments, and real money balances, as the economy moves from long-run equilibrium to short-run equilibrium. What economic condition is the economy in after the shock? __________________ Short-run Output ________________ Unemployment _________________ Prices _________________ Interest rate _________________ Consumption _________________ Investment _________________ Real Money Bal _________________ 2. If the government wants to keep output and unemployment constant in the face of the negative demand shock, what should it do (indicate the policy or policies that it should implement).
Please write on the space provided what happens to each variable -- indicate whether each variable increases, decreases, or remains unchanged. Please show in the graphs the initial equilibrium, short run equilibrium, and final long run equilibrium. If possible, please provide only two graphs, one for IS-LM and one for AD-AS that show all of the equilibrium positions
Suppose the economy is initially in a long-run equilibrium. Starting from this position, assume that an exogenous shock such as the Covid 19 pandemic pushes the economy away from the equilibrium.
- Using the IS-LM and AD-AS framework, indicate what happens in the short run to output,
unemployment ,prices , interest rate, consumption, investments, and real money balances, as the economy moves from long-run equilibrium to short-run equilibrium.
What economic condition is the economy in after the shock? __________________
Short-run
Output ________________
Unemployment _________________
Prices _________________
Interest rate _________________
Consumption _________________
Investment _________________
Real Money Bal _________________
2. If the government wants to keep output and unemployment constant in the face of the negative
Output refers to the total product that an economy produces within a period in a country. It is also termed as GDP, GNP or National income. It is used to evaluate the welfare and growth of countries.
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