Question

1. Draw an aggregate demand and aggregate supply curve on the graph. 2. What do we...

1. Draw an aggregate demand and aggregate supply curve on the graph.

2. What do we see at the macro equilibrium?

3. Assuming that we are all at full employment equilibrium, suggest a disturbance that would move us away from the full employment equilibrium? Show this disturbance graphically.

4. If we are at an unemployment equilibrium, what policy might you use to bring us to full employment? Explain and show graphically.

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Homework Answers

Answer #1

A.

B.At the macro level the intersection of AD and AS determines the general price level and the overall output produced by an economy.

C.Full employment occurs when AD=AS=LRAS.

An tariff on exports of domestic product by another country will reduce net exports and reduce the aggregate demand shifting it to the left.

D.Suppose the economy is below full employment level.An expansionary fiscal policy increases the aggregate demand(as G is part of aggregate demand),shifting AD to the right.

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