Question

Use an AD-AS model to depict the following scenarios in the short-run: a. The government cuts...

Use an AD-AS model to depict the following scenarios in the short-run:

a. The government cuts taxes

b. There is a reduction in government spending

c. The rate of inflation increases

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

a.

With the decrease in tax, the aggregated demand would shift to right in the short run. As supply cannot be changed in the short run, only AD curve shifts to right

b.

Decrease in government spending is a contractionary fiscal policy which reduces the AD, hence the curve shifts to left.

c.

With the increase in inflation the cost of inputs increases which increases cost of production thereby reducing supply

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
For each of the following, use the AD-AS diagram to show the short-run and longrun effects...
For each of the following, use the AD-AS diagram to show the short-run and longrun effects on output and inflation (assuming “self-correction”, i.e. no “stabilization policy”). Assume that the economy starts in long-run equilibrium. a) The government reduces taxes. b) The Fed tightens monetary policy. c) Oil prices drop sharply and unexpectedly.
In the AS AD model for the very short run (immediate short run AS) expenditure shocks...
In the AS AD model for the very short run (immediate short run AS) expenditure shocks operate as they did in the multiplier model (with magnified effects on real GDP).   Explain why that analysis isn’t completely realistic for figuring out how much real GDP would ultimately respond to a trillion dollar increase in government spending at this particular moment in history (the US in 2019
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
Short-run contractionary fiscal policy would result in: AD moving to the right. AS moving to the...
Short-run contractionary fiscal policy would result in: AD moving to the right. AS moving to the right. AD moving to the left. AS moving to the left. Stimulus checks and tax changes are all examples of Monetary Policy Fiscal Policy Contractionary Policy Expansionary Policy If the federal government decide a contractionary fiscal policy is ​necessary, what changes should they make in government spending or​ taxes? The federal government should enact policies that decrease government spending and decrease taxes. The federal...
consider the macroeconomic AD-AS model with an aggregate demand curve and a short-run aggregate supply curve....
consider the macroeconomic AD-AS model with an aggregate demand curve and a short-run aggregate supply curve. assume that changes in national output also represent changes in real GDP. a. use the AD-AS model to explain and illustrates the differences between demand-side measures and supply-side measures and give an example of each. you also need to mention which markets are embedded within each curve. b. use the AD-AS model to analyse and illustrate the short run impact of an increase in...
Concider how short-run fluctuations affect many things: unemployment, inflation, consumer confidence, spending by firms, government spending...
Concider how short-run fluctuations affect many things: unemployment, inflation, consumer confidence, spending by firms, government spending ect. Use the AS-AD model to illustrate examples of how recession or expansion has a broad influence on society.
Use the AS/AD model to explain the immediate and medium-run impact of the following events on...
Use the AS/AD model to explain the immediate and medium-run impact of the following events on short-run output, inflation, and the unemployment rate. (10 points each) a) Negotiations breakdown and the United Kingdom makes a hard Brexit. The U.K. imports a significant number of intermediate goods from mainland Europe. b) In response to the European Debt Crisis, the Greek government revises economic policy and limits licensing requirements, fees, and other barriers to entry that tend to increase the cost of...
AS in the Immediate Short Run (Range 1 of AS): Scenario: There is an increase in...
AS in the Immediate Short Run (Range 1 of AS): Scenario: There is an increase in U.S. government spending Question 1)      a) AD increases      b) AD decreases      c) AS increases      d) AS decreases Question 2)      a) GDP growth rises      b) GDP growth falls      c) GDP growth remains unchanged Question 3)      a) unemployment rises      b) unemployment falls      c) unemployment remains unchanged Question 4)      a) inflation increases      b) inflation decreases...
Aggregate supply in the immiate short run (Range 1 of AS) Scenario: There is an increse...
Aggregate supply in the immiate short run (Range 1 of AS) Scenario: There is an increse in U.S government spending Question 1) a. AD increases b. AD decreases c. AS increases d. AS decreases Question 2) a. GDP growth rises b. GDP growth decrease c. GDP growth remains unchanged Question 3) a. unemployment rises b. unemployment falls c. unemployment remains unchanged Question 4) a. inflation increases b. inflation decreases c. inflation remains unchanged
Question no 1 Consider the AD-AS model. Assume that the short run AS-curve (the SRAS-curve) is...
Question no 1 Consider the AD-AS model. Assume that the short run AS-curve (the SRAS-curve) is upward sloping (and therefore not perfectly horizontal). Assume that the economy is in a long run equilibrium, when government purchases suddenly increase. Assume that this change in government purchases was anticipated by the economic agents, and that they have rational expectations. As a result, following are options tell me correct option 1. the aggregate price level becomes higher than expected in the short run,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT