Use the following scenario for the next two questions. Suppose that the federal government decides to forgive all current (and future) outstanding student loans (estimated to total around $1.6 trillion as of early 2020). When thinking about the AD/AS model, which curve would this shift in the short-run, and in which direction? AD curve, to the left AD curve, to the right OSRAS curve only, to the right OSRAS and AD curves, to the left OSRAS and LRAS curves, to the left

Use the following scenario for the next two questions. Suppose that the federal government decides to forgive all current (and future) outstanding student loans (estimated to total around $1.6 trillion as of early 2020). When thinking about the AD/AS model, which curve would this shift in the short-run, and in which direction? AD curve, to the left AD curve, to the right OSRAS curve only, to the right OSRAS and AD curves, to the left OSRAS and LRAS curves, to the left

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use the AD/AS framework to explain how the economy adjusts in the short run and the long run to each of the following (assuming that the economy starts at potential GDP with no spare Capacity and a given price level): a) World energy prices rise and then settle at a new higher level, and this raises input prices for all domestic producers. b) There is a one-off fall in export demand which stays at the new lower level. c) The monetary policy makers lower their official interest rate and hold it at the new lower level. d)The government raises its current spending and keeps it at the new level. e)Say what might have happened to the other components of aggregate demand when the economy has adjusted to the change In d) in the long run.
Notice the major differences between our Keynesian Cross (in your chapter 9 appendix) and the Macro Equilibrium (AS and AD) diagram? Which model has more to offer in which situations?
Please see below. These are true or false questions. 1). The aggregate supply curve will shift left as the price of key inputs rises, and will shift out to the right if the price of key inputs falls. 2). Long-term economic growth is illustrated in the AD/AS framework by a gradual shift of the aggregate supply curve to the left.
Philip's Curve and AD-AS Model: Use assumptions below to set up an initial point denoted as the point A for a and b. For each of the following draw an AD/AS diagram and a corresponding Philip's curve assuming the following: 1) Natural unemployment is 5% 2) Unemployment is 4% 3) Actual GDP is 20,000 4) Full employment GDP is 10,000 a)show in both diagrams the effect of a surprise increase in inflation. b)Show in both diagrams the effect of Friedman and the Natural rate Theory(Hint:using monetary policy in the short run, but self-correction in the long run) c) Show in both diagrams the effects of a decrease in income tax on price level, output,unemployment and inflation.(Hint: Fiscal Policy) d)show in both diagrams the effect of a decrease in expected inflation.
Use the AD-AS model diagram to address the effects of increasing government expenditure in the short-run and in the long-run equilibrium.
Show and explain graphically the AD/AS model in neoclassical economic and macroeconomic.
Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayeks idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce?
Which of the following is a major difference between the AD-AS model and the dynamic AD-AS model? The dynamic AD-AS model assumes OA. AD only includes consumption, investment, and government purchases, while the AD-AS model assumes AD includes consumption, investment, government purchases and net exports. B. the SRAS is stable and will not shift, while the AD-AS model assumes the SRAS can only change with an exogenous event such as oil price changes. OC. the economy does not experience long-run growth, while the AD-AS model assumes there is constant inflation in the economy. OD. potential GDP increases continually, while the AD-AS model assumes the LRAS does not change.
10. In an AD/AS model, the point where the economy has excess capacity is called the: (A) Keynesian zone of the AS curve (B) intermediate zone of the AS curve (C) neoclassical zone of the AS curve (D) crossing point of the potential GDP line
the question is true or false: "An increase in business investment spending has the same effect on the level of ad as an increase in the same amount of government spending" can you explain what the answer is? Would they equal each other out?
What is the best approach to managing the economy, supply-side or demand-side economics? There are two schools of thought on how to managing the economy. The first is demand-side economics which also the Keynesian approach. This approach maintains that the demand for products and services drives the economy as such economic policies should focus on the aggregate demand curve. The other approach is called supply-side economics or more popularly referred to as Reaganomics. In this trickle-down approach, it is postulated that the production of goods and services is what drives the economy with the focus on the aggregate supply curve. Both fiscal and monetary policies have the potential to stimulate change in either the aggregated demand or the aggregate supply curves. In your initial post defend which approach should be used to (ensure to include in your subject line, which approach you are defending): Restore the economy that is in a recession. Identify the challenges that may be…
let's consider the AS/AD model. furthermore, assume two events happen at the same time: government conducts contractionary fiscal policy and the global price of energy (oil) falls. show the effects of these two events in a graph and explain what will happen to the GDP and price level?