Supply and Demand and Aggregate Supply Curve.

1966 Words May 20th, 2011 8 Pages
Entorno Económico de la Empresa
Tarea 5

1. The following events have occurred at times in the history of the United States: * A deep recession hits the world economy. * The world oil price rises sharply. * U.S. businesses expect future profits to fall.
a. Explain for each event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.
A deep recession in the world economy decreases aggregate demand. A sharp rise in oil prices decreases short-run aggregate supply. The expectation of lower future profits decreases investment and decreases aggregate demand.
b. Explain the separate effects of each event on U.S. real GDP and the price level, starting from a
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d. Describe two events could have changed aggregate supply from SAS0 to SAS1.
Short-run aggregate supply decreases if the money wage rate rises or the money price of any other factor of production, such as oil rises.

4. It’s a Recession—75 Percent of Americans Say In a telephone poll of over 1,000 adult Americans, 75 percent said they believe the nation is now in a recession … “From a consumers’ perspective, the economy is bad, and the environment is going to be tough for a while,” said Wachovia economist Mark Vitner ... Though growth was sluggish in the last quarter of 2007 and the first quarter of 2008, the U.S. economy has not yet shown retraction in the current slowdown. … “Whether the economy technically meets the definition of a recession matters more for economists and policy makers than it does for consumers,” said Vitner. ... Of those who think the economy is in a recession, 27 percent said they believe we are in a serious recession. ... Americans are less confident in the future of the economy than they were in March. The poll showed that 23 percent believe the downturn will last more than two years, up from 19 percent in March…
CNN, July 7, 2008
a. Explain the effects of a decrease in consumer confidence on the short-run macroeconomic equilibrium and draw a graph to illustrate the effects.
When consumers
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