Question

Draw an economy in long run equilibrium. b) Suppose that the U.S. dollar depreciates. Which curve...

Draw an economy in long run equilibrium.

b) Suppose that the U.S. dollar depreciates. Which curve will shift as a result of the shock?

c) Illustrate the shift on your graph above.

d) Explain what happens to Y, P, and unemployment in the short-run.

e) State whether the economy is at a full-employment equilibrium, below full-employment equilibrium, or above full- employment equilibrium after the shock. Principles of Macroeconomics

f) State whether the unemployment rate is above or below the Natural Rate of Unemployment (NRU) after the shock.

g) State whether the economy has an expansionary gap or a contractionary gap after the shock.

h) State whether the economy experiences cost-push inflation, demand-pull inflation, or no added inflation.

i) If Congress uses fiscal policy to correct the economy, which curve will shift and in which direction? Illustrate the shift on your graph above.

j) List 3 fiscal policies that Congress could enact to correct the economy (specifically state whether the policy is an increase or decrease)

Homework Answers

Answer #1

A -

B - AD curve will shift right as a result of this because exports rise as dollar depreciates

C - Real GDP and price level will rise and unemployment will fall.

D - Economy is above the full employment level after this shock

E - Rate of unemployment is below the natural rate of unemployment

F - Gap is expansionary in nature

G- Economy is experiencing demand pull inflation

H - AD will shift in left (inward direction)

I - Three fiscal policies are -

1 - Increase in taxes

2 - Decrease in spending

3 - Decrease in transfer payments

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a) Draw the U.S. economy in long run​ equilibrium--just draw it on your paper. ​b) Suppose...
a) Draw the U.S. economy in long run​ equilibrium--just draw it on your paper. ​b) Suppose that firms expect profits to decrease. Which curve will shift as a result of the shock and in which​ direction? A. SAS will shift Left B. AD will shift Right C. AD will shift Left D. SAS will shift Right ​c) Illustrate the shift on your​ graph--again, just draw it on your paper. ​d) Explain what happens to​ Y, P, and the unemployment rate...
An economy is in long-run macroeconomic equilibrium, with output at Yp, when the following aggregate demand...
An economy is in long-run macroeconomic equilibrium, with output at Yp, when the following aggregate demand shock occurs: The quantity of money in the economy declines and interest rates increase. What kind of gap (inflationary or recessionary) will the economy face after the shock, and what type of fiscal policies would help move the economy back to potential output? This will cause an inflationary gap; an expansionary policy should be used. This will cause a recessionary gap; an expansionary policy...
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that...
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that in this economy, there is an adverse (i.e. negative) supply shock. Additionally, there is an increase in people’s expectations about future inflation. Considering the Phillips Curve, answer what will happen to: i)    The inflation rate. ii)    The unemployment rate. In the short-run for such an economy. Inflation will increase; unemployment will increase. Inflation will decrease; unemployment will decrease. Inflation will increase; unemployment will decrease....
Quantitative Reasoning Assignment on Fiscal Policy Assume the economy is currently in short run equilibrium but...
Quantitative Reasoning Assignment on Fiscal Policy Assume the economy is currently in short run equilibrium but experiencing a recessionary gap, what combination of fiscal policies might the Federal government pursue to correct problem? Graphically illustrate and explain. Assume the economy is currently in short run equilibrium but experiencing an inflationary gap, what combination of fiscal policies might the Federal government pursue to correct problem? Graphically illustrate and explain.
Assume that a country's economy run equilibrium and the actual unemployment lower than the natural rate...
Assume that a country's economy run equilibrium and the actual unemployment lower than the natural rate of unemployment A)This economy is in what state 1 Where is the current output level, in relation to full employment 2 is thete inflation in this economy Why or Why not B)What open-market operation can the country's central bank use to move the economy toward its long-run equilibrium C)As a result of that action above what happens to the Money Supply and equilibrium nominal...
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that...
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that in this economy, there is a change in the regulation of the labor market This change in regulation makes it easier for employers to hire and fire people, thus reducing frictional unemployment. Assume further that there is no change in people’s inflation expectations after this. Considering the Phillips Curve, answer what will happen to: i)    The inflation rate. ii)    The unemployment rate. In the...
If the economy begins at a short-run equilibrium below potential output, then there would be upward...
If the economy begins at a short-run equilibrium below potential output, then there would be upward pressure on wages but not prices upward pressure on prices but not on wages downward pressure on wages but not on prices downward pressure on both wages and prices If the economy is at a short-run equilibrium above potential output, which of the following would occur upward pressure on wages because the labor market is operating above full employment upward pressure on wages because...
Suppose that an economy is initially at the long-run and short-run equilibrium. In the next year,...
Suppose that an economy is initially at the long-run and short-run equilibrium. In the next year, we observe that the real GDP and the potential GDP remains the same but the price level has increased. Which curve(s) in the LRAS-SRAS-AD diagram must have shifted to generate the observation above? If any of the curves has shifted, state the direction of the shift, propose a factor that leads to the shift of the curve and state clearly whether the factor has...
Suppose the economy is in a long-run equilibrium. Then, suppose the price of imported oil rises...
Suppose the economy is in a long-run equilibrium. Then, suppose the price of imported oil rises sharply. Discuss the effects of this shock in the short- run. If the Central Bank undertakes an expansionary policy, can it return the economy to its original output and original unemployment rate?
When the economy is producing at an output level below the potential output, the unemployment rate...
When the economy is producing at an output level below the potential output, the unemployment rate is above the natural rate of unemployment. the short-run aggregate supply curve will slowly shift to the left when wages start to adjust. the intersection of the short-run aggregate supply curve and the aggregate demand curve is to the right of the long-run aggregate supply curve. the economy might be at the long-run equilibrium. Which of the following is not a determinant of the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT