Chapter15: Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical
Section: Chapter Questions
Problem 7E
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A) Distinguish between the short run and the long run as they relate to macroeconomics . Why is the distinction important?
B) Use graphical analysis to show how each of the following would affect the economy first in the short run and then in the long run. Assume that the United States is initially operating at its full-employment level of output, that
i) Because of a war abroad, the oil supply to the United States is disrupted, sending oil prices rocketing upward.
ii) Construction spending on new homes rises dramatically, greatly increasing total U.S. investment spending.
iii) Economic recession occurs abroad, significantly reducing foreign purchases of U.S. exports.
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