Question

a) Use AS-AD to show an economy that is in stagflation. Clearly explain in 2-3 sentences,...

a) Use AS-AD to show an economy that is in stagflation. Clearly explain in 2-3 sentences, what is happening with the actual price level, actual unemployment, and actual output.

  1. List one specific fiscal policy tool available to policy makers to help address the problem described in (a) above. Explain in 2-3 sentences, what happens to the actual price level, actual output, and actual unemployment after the successful use of fiscal policy tool you just described.
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

In stagflation following things happen

1. output decrease, price level increase which shows the increase in inflation rate and employment decrease

presented in the graph.

the only real solution could be enhancing the supply-side by increasing in productivity. this enable higher growth without inflation. here in this policy, we are trying to eliminate structural unemployment by enhancing labor skills. that will lead to higher productivity and output will be more and the price will be back to the original position or less.

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
Assume the economy is initially in long-run equilibrium. Explain briefly how short-run stagflation (recession combined high...
Assume the economy is initially in long-run equilibrium. Explain briefly how short-run stagflation (recession combined high inflation) results from an adverse supply shock. (Hint: Use AD-AS diagrams to show what happens to P and Y.) Suppose that stagflation occurs. To help economy go back to its full-employment output, how should the government use her budgetary tool that is based on corporate tax? Briefly explain your answer.
Question 3.Define stagflation. Using AD/AS diagram, examine the possible factors that can lead to stagflation and...
Question 3.Define stagflation. Using AD/AS diagram, examine the possible factors that can lead to stagflation and explain their effects on output, the price level, and employment.
2. Use AD and AS curves to explain the effects on the equilibrium price level and...
2. Use AD and AS curves to explain the effects on the equilibrium price level and equilibrium level of output in the short run. (a) An expansionary fiscal policy with the economy operating near full capacity. (b) A contractionary monetary policy during a period of high unemployment and excess industrial capacity. (c) A strong hurricane destroys energy plants which cause energy prices to increase, assuming that the Fed attempts to keep interest rates constant by accommodating inflation. (d) The federal...
Suppose an economy is hit by a recession and people's income fall. a)Show graphically using AD-AS...
Suppose an economy is hit by a recession and people's income fall. a)Show graphically using AD-AS model how the price level and output are affected in the long-run. b)Can the government use fiscal policy to offset the effects on price level and output,explain?
Use AD and AS curves to explain the effects on the equilibrium price level and the...
Use AD and AS curves to explain the effects on the equilibrium price level and the equilibrium level of output in the short run. (a) An expansionary fiscal policy with the economy operating near full capacity. (b) A contractionary monetary policy during a period of high unemployment and excess industrial capacity. (c) A strong hurricane destroys energy plants which cause energy prices to increase, assuming that the Fed attempts to keep interest rates constant by accommodating inflation. (d) The federal...
Suppose that a decrease in the demand for goods and services pushes the economy into recession....
Suppose that a decrease in the demand for goods and services pushes the economy into recession. Assuming policymakers do nothing, what happens to the price level, output, and unemployment in the short run? What ensures that the economy still eventually gets back to the natural rate of output? What happens to price-level, output, and unemployment in the longrun? Use an appropriately labeled AD-SRAS-LRAS diagram to help explain your answer.
3. An economy is initially at a long run equilibrium (GE). A. On the AD-AS graph,...
3. An economy is initially at a long run equilibrium (GE). A. On the AD-AS graph, show the AD, LRAS and SRAS curves/lines. Label this “A” B. The Central Bank (Federal Reserve) increases the money supply. Give one action the Fed can take to increase the money supply.       _________________________________ Show how this changes the AD-AS graph. Label the curve/line that shifts with a “2” and label the new equilibrium “B”       There is no additional policy action: C. Show...
Assume that there are two economies, A and B. Economy A is experiencing an inflationary output...
Assume that there are two economies, A and B. Economy A is experiencing an inflationary output gap, and economy B is experiencing a recessionary output gap. Illustrate the two economies in labeled graphs. Explain what will happen to wages and other factor prices in economy A and if this will increase or decrease firm's unit cost. Given your answer in (b) show the effects on the AS curve. Explain what happens to real GDP and the price level. Explain what...
First, watch the video "Inside the meltdown" Now let's use the AD/AS model you learned in...
First, watch the video "Inside the meltdown" Now let's use the AD/AS model you learned in chapter 10 to analyze the impact of the banking crisis on the macroeconomy.   1. First, assume that the economy was in a long-run equilibrium in spring 2008. Then, the financial turmoil started. Due to the bust of stock prices, consumer wealth declined, and consumer confidence dropped dramatically. What happened to aggregate demand? Illustrate your answer with a graph, and then explain verbally. 2. According...
Using SRAS-AD-LRAS framework and beginning at long run equilibrium, explain the impact of an expansionary fiscal...
Using SRAS-AD-LRAS framework and beginning at long run equilibrium, explain the impact of an expansionary fiscal policy in an economy. Discuss the impact on Price level, real GD, unemployment and interest rate both in short and long run.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT