Question

1- If the illegal drug trade was legalized what would happen to GDP? 2-Why is a...

1- If the illegal drug trade was legalized what would happen to GDP?

2-Why is a slow growing economy a problem during a recession?

Homework Answers

Answer #1

1)If in an economy suddenly legalized legal drug trade   which was previously illegal, it would leads to increase in the aggregate expenditure because previously the activity which was not under aggregate expenditure but after legalizing it,it will come under the aggregate expenditure. For example Consumption level will increase and Investment may also increase. This causes the aggregate expenditure shift upward from AE to AE1 and it leads to increase in real GDP from Y1 to Y2. All this has been shown in the below diagram 2)A recession has a domino effect, where increased unemployment leads to less growth and a drop in consumer spending, affecting businesses, which lay off workers due to losses. A recession occurs when there are two or more consecutive quarters of negative gross domestic product (GDP) growth

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
What does the trade-to-GDP ratio indicate about an economy? Why does a smaller country, such as...
What does the trade-to-GDP ratio indicate about an economy? Why does a smaller country, such as Luxembourg, generally have a larger trade-to-GDP ratio?
If a drug that blocked the reabsorption of sodium were taken, what would happen to the...
If a drug that blocked the reabsorption of sodium were taken, what would happen to the reabsorption of glucose? a. increase b. decrease c. no change If a drug that blocked the reabsorption of sodium were taken, what would happen to the reabsorption of water? a. increase b. decrease c. no change
Problem 1. China-US Trade War What was the origin of China-US Trade War? How did it...
Problem 1. China-US Trade War What was the origin of China-US Trade War? How did it escalate? Who are the winners and losers (countries, individuals, firms, farmers, etc.)? Problem 2. China-US Trade Deficit It has been controversial whether running trade deficit against China is good/bad for the US economy. What are the arguments on both sides and which part do you agree? Problem 3. Covid-19, International Trade and Economy What is the impact of covid-19 on international trade, global supply...
Assume that Australia’s macroeconomic equilibrium is equal to potential GDP. What would happen if the demand...
Assume that Australia’s macroeconomic equilibrium is equal to potential GDP. What would happen if the demand for new houses increases? Using the AD-AS model, explain carefully the immediate and long term effects of the event towards the economy. Draw by hand the appropriate AD-AS diagram to support your explanation.
b) Assume that Australia’s macroeconomic equilibrium is equal to the potential GDP. What would happen if...
b) Assume that Australia’s macroeconomic equilibrium is equal to the potential GDP. What would happen if the demand for new houses increases in Australia? Using AD-AS model, explain carefully the immediate and long term effects of the event towards the economy. Draw by hand the appropriate AD-AS diagram to support your explanation.
What components of GDP tend to decline significantly during recessions (particularly during the 2008 recession), and...
What components of GDP tend to decline significantly during recessions (particularly during the 2008 recession), and what GDP components rise during expansion? In other words, what aspects of GDP are mostly affected when the economy slows down? and why?
What will happen to the trade balance and the real exchange rate of a small open...
What will happen to the trade balance and the real exchange rate of a small open economy when government purchases increase, such as during a war? Does your answer depend on whether this is a local war or a world war?
1- Three approaches in estimating GDP ? 2-List the five components of GDP? 3-why should the...
1- Three approaches in estimating GDP ? 2-List the five components of GDP? 3-why should the government interfere in economy? 4- how Monetary Policy and Fiscal Policy affects the Economy?
1. Suppose the U.S. economy moves out of a recession and incomes rise. What will happen...
1. Suppose the U.S. economy moves out of a recession and incomes rise. What will happen to the equilibrium prices and quantities of normal goods? If price stays the same would that be equilibrium? Why or why not? What will eventually happen in the market? What happens to equilibrium price and quantity? Which quantity is affected and how do you know? Would your answer be the same if you were discussing inferior goods? Explain using supply/demand graphs. 2. Draw a...
what would you expect to happen to the spread between yields on commercial paper and treasury...
what would you expect to happen to the spread between yields on commercial paper and treasury bills if the economy were to enter a steep recession.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT