5. For each of the following, draw an Aggregate Demand- Aggregate Supply diagram with left hand axis inflation and bottom axis output to show the short-run and long-run effects on output and inflation. Assume the economy starts in long-run equilibrium and explain the consequences of any shifts: (i) An increase in consumer confidence that leads to higher consumption spending (ii) An easing of monetary policy by the Central Bank (a change in inflation target which causes a shift to the right in their Monetary Policy Reaction Function). (iii) War in Ukraine which causes a rise in government purchases. (iv) A sharp fall in oil prices post war in Ukraine.

5. For each of the following, draw an Aggregate Demand- Aggregate Supply diagram with left hand axis inflation and bottom axis output to show the short-run and long-run effects on output and inflation. Assume the economy starts in long-run equilibrium and explain the consequences of any shifts: (i) An increase in consumer confidence that leads to higher consumption spending (ii) An easing of monetary policy by the Central Bank (a change in inflation target which causes a shift to the right in their Monetary Policy Reaction Function). (iii) War in Ukraine which causes a rise in government purchases. (iv) A sharp fall in oil prices post war in Ukraine.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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part d
39 Which of the following will cause a shift in the short-run aggregate supply curve? a.An increase in government spending b.A change in expected inflation c.Unanticipated inflation d.A change in investment e.A decrease in government spending
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