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- Suppose firms are optimistic about the outlook of the economy and they decide to increase investment. Also suppose that, simultaneously, there is a reduction in business taxes. Use the AD-AS graph to show what happens to the price level and output as a result.Graphically derive and explain the AD curve.Assume that the United States' macroeconomic equilibrium is equal to the potential GDP. Americans are becoming more cautious with their household spending due to the uncertainty of the presidency of Donald Trump. Using the AD-AS model, explain carefully the immediate and long-term effects of the event on the economy. Draw the appropriate AD-AS diagram to support your explanation.
- An economist for the ruritanian ministry of economy recommends a tax to households of 20 billion. The country currently has a savings rate of 15%. On a seperate sheet of paper. graph a notional AD/AS model and explain what happens in the long run .The government announces a cut in the income tax rate. Use the AD/AS model to analyse the short-run effects of this policy on GDP and the price level in the economy.Suppose the Australian government increases the level of government spending. Explain how an increase in government spending impacts upon the position of the AD and AS curves. Use a relevant diagram and explain your answer in detail.
- The government announces a cut in the income tax rate. (a) Explain the multiplier effect by analysing how a typical consumer would react to this tax cut and which other decisions this reaction would trigger in the economy. (b) Use the AD/AS model to analyse the short-run effects of this policy on GDP and the price level in the economy. (c) What are the long-run effects of the tax cut?Please draw a AD-AS model as to how whether a tax that improves people’s health could have any potential long-term benefits for the economy.Beginning in March 2013, federal government spending was resstrained due to the sequester (feel free to Google details). Moreover, then President Obama’s budget proposals called for cuts in various types of government spending over the next ten years. Use the AD-AS model (along with a labor market graph) to show and explain how this will affect Y, N, W/P, and P over time. As an aside, recent news reports have suggested that the possibility of a renewed use of the sequester is part of the current political maneuvering over the federal budget for the fiscal year that starts October 1st.
- Using an AD-AS diagram, explain what happens if personal income taxes increase.Hayek says that markers will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek's idea that governments cannot increase real GDP beyond the level that the free market economy is able to produceinclude a graph that shows where Canada currently is on the business cycle. Also include an AD-AS Model graph that shows if the economy is currently experiencing a recessionary gap, expansionary gap, or long run equilibrium.