Question

Using the AD-AS model, suppose climate change and dwindling water resources increase tensions between nations, causing...

Using the AD-AS model, suppose climate change and dwindling water resources increase tensions between nations, causing them to increase their military spending. What are the short and long run impacts of this policy change?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Suppose the economy is in long run equilibrium which is attained at SRAS = AD = LRAS. Now, suppose there is increase in military expenditure by the government as a result AD curve will shift to the right. As a result in the short run there will be an inflatiionary gap as output will rise and price level will also rise. But in the long run wagers will revise their expectations upward which raises the SRAS upward and this will continue until the new equilibrium is not reached and at that equilibrium output remains at full employment and only price level will increase.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose an economy is hit by a flood and its natural resources decreases. a)Show graphically using...
Suppose an economy is hit by a flood and its natural resources decreases. a)Show graphically using AD-AS model how the price level and output are affected in the short-run. b)Can the government use monetary policy to offset the effects on price level and output,explain.
Using an AD/AS model, describe what happens to the price level and output in Canada in...
Using an AD/AS model, describe what happens to the price level and output in Canada in the short run as a stock market crash reduces personal wealth. Assume that the economy starts in long- and short-run equilibrium. a) Prices and output will increase. b) Prices and output will decrease. c) Prices will increase and output will decrease. d) Prices will decrease and output will increase. Using an AD/AS model, describe what happens to the price level and output in Canada...
Using the AD-AS model, an economy is at its long term equilibrium, growing at 1%. Government...
Using the AD-AS model, an economy is at its long term equilibrium, growing at 1%. Government decides to reduce taxes and increase government spending. What changes will be seen in the AD-AS model, how will the graph look, what effect does it have in economy?
Suppose the U.S. economy is in a recession which is accompanied by deflation. Using the AD/AS...
Suppose the U.S. economy is in a recession which is accompanied by deflation. Using the AD/AS model, cite and discuss 3 possible paths (policy oriented or not—your choice) for the economy to emerge from this recession and return to a long-run equilibrium. Be sure to describe how this recession came to be within the context of the AD/AS model. Do not include any graphs in your answer.   
Using the AS-AD model, analyze how the following events will affect an economy in the short-run...
Using the AS-AD model, analyze how the following events will affect an economy in the short-run and in the long-run perspective: The government has abolished employees’ health insurance paid by employers; The price of oil has increased; A foreign country’s government has imposed restrictions on the country’s exports; The government has initiated a program of investing in education; The government has increased spending on healthcare
Consider the AD-AS model, with the AD curve derived from the quantity theory of money. Suppose...
Consider the AD-AS model, with the AD curve derived from the quantity theory of money. Suppose the economy is initially in long-run equilibrium, when there is a sudden rise in demand for real balances for any given level of output, and simultaneously also an improvement in productive technology that permanently increases how much firms can produce with any given amount of the factors of production. (a) Immediately following these shocks, what happens to velocity? To the AD curve? The LRAS...
Factors that could cause the SRAS curve to shift are a. Fiscal policy b. Productivity increase...
Factors that could cause the SRAS curve to shift are a. Fiscal policy b. Productivity increase c. Consumer confidence d. Oil price increase QUESTION 2 Which of the following would shift the AS curve? a. The level of government spending b. Incentives to install a new technology c. An increase in labor productivity d. The costs of the factors of production QUESTION 3 Households decide to save a larger portion of their income. According to the AD/AS model this change...
Suppose that a sudden increase in aggregate demand moves the economy from its long-run equilibrium. (a)...
Suppose that a sudden increase in aggregate demand moves the economy from its long-run equilibrium. (a) Illustrate this change using the aggregate demand-aggregate supply model. (b) What are the effects of this change in the short run and the long run?
Question 1 (1 point) Which of the following would shift aggregate demand to the right? Question...
Question 1 (1 point) Which of the following would shift aggregate demand to the right? Question 1 options: Increased technological knowledge An increase in net exports An increase in the interest rate Greater availability of natural resources Question 2 (1 point) Which of the following would shift the current long-run aggregate supply curve to the left? Question 2 options: A decrease in employment Increased net exports More capital Reduced investment spending Question 3 (1 point) According to classical economics, in...
Using TE and AD/AS, explain and diagrammatically depict the effect of an increase in the money...
Using TE and AD/AS, explain and diagrammatically depict the effect of an increase in the money supply on P and Y in the short-run and the long run. I want the first period's equilibrium, the long-run equilibrium (from self-adjustment) and the story of how the economy adjusts to this monetary shock. Make sure to thoroughly explain what happens to TE as the price level adjusts.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT