a. Sketch an AD/AS graph for the U.S. in both long-run and short-run equilibrium. b. On the U.S. AD/AS graph, demonstrate and explain what will happen if the Japanese economy experiences a recession. c. Given what you just demonstrated in b, explain why U.S. policy makers pay close attention to 'booms and busts' in foreign economies.

a. Sketch an AD/AS graph for the U.S. in both long-run and short-run equilibrium. b. On the U.S. AD/AS graph, demonstrate and explain what will happen if the Japanese economy experiences a recession. c. Given what you just demonstrated in b, explain why U.S. policy makers pay close attention to 'booms and busts' in foreign economies.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Classical Macro Economics And The Self Regulating Economy

Section: Chapter Questions

Problem 18QP

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The Treasury notes that there are several ‘risks’ to its predictions. These include that “ The potential for an extended conflict in the Ukraine ... has increased the risk of supply disruptions, pushing up and increasing volatility in energy, agricultural and metals prices..... A prolonged conflict will increase the risks associated with the negative terms of trade and confidence shocks for these countries” Using the dynamic AD/AS model, illustrate and explain how an extended conflict in the Ukraine would impact on the Australian economy. Be sure to discuss the pathways by which this conflict may impact on the domestic Australian economy. Hint: Start from diagram representing the current position of the economy and then illustrate what happens, consistent with your argument, showing both short run and long run effects. The majority of the marks for this question depend on what you write.
Q)Using the dynamic AD/AS model, explain why Kennedy is concerned about the state of the global economy. What difference might it make to the Australian economy if the trading relationship between China and Australia deteriorates as political tensions continue to increase?
Answer only D &E ( No need to answer a,b,c) 18. Using AS-AD diagrams, illustrate each of the following economic situations by showing the patterns and shifts of either AS or AD that could cause them to happen: a. a rise in the price level triggered by higher oil prices; b. a rise in inflation that happens four years in a row because government spending keeps increasing; c. foreign investors gain confidence and increase the level of investment in the U.S. economy; d. the economies of trading partners grow very slowly, leading to a decrease in exports to those countries e. output declines slightly but the price level falls a great deal. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Create a graph that shows where Mexico currently is on the business cycle. Be sure to include an AD-AS Model graph that shows if the economy is currently experiencing a recessionary gap, expansionary gap, or long run equilibrium.
The context is a large negative shock to autonomous consumption in an open economy. You may assume the economy is initially at a medium run equilibrium. Aggregate demand can decline for many reasons. Give a specific example of when you would choose to model the onset of a recession by a fall in autonomous consumption and explain why. Use graphs if possible.
In this section, the context is a large negative shock to autonomous consumption in an open economy. You may assume the economy is initially at a medium run equilibrium. Aggregate demand can decline for many reasons. Give a specific example of when you would choose to model the onset of a recession by a fall in autonomous consumption and explain why.
Use the AD/AS framework to explain how the economy adjusts in the short run and the long run to each of the following (assuming that the economy starts at potential GDP with no spare Capacity and a given price level): a) World energy prices rise and then settle at a new higher level, and this raises input prices for all domestic producers. b) There is a one-off fall in export demand which stays at the new lower level. c) The monetary policy makers lower their official interest rate and hold it at the new lower level. d)The government raises its current spending and keeps it at the new level. e)Say what might have happened to the other components of aggregate demand when the economy has adjusted to the change In d) in the long run.
Keynes notes that when looking at aggregate demand (AD), there are two factors that can cause shifts in import and export demand. Which of the following would be such a factor? A,B,C, OR D ONE ASNWER A Changes in populations B Changes in relative growth rates between countries C Changes in the discount rate D Changes in savings behavior
Use shifts of the AD and AS curves to explain (a) the U.S. experience of strong economic growth, full employment, and price stability in the late 1990s and early 2000s and (b) how a strong negative wealth effect from, say, a precipitous drop in the stock market could cause a recession even though productivity is surging.
Many financial analysts and economists eagerly await the press releases for the reports on the home price index and consumer confidence index. What would be the effects of a negative report on both of these? What about a positive report?
Does Says law apply more accurately in the long run or the short run? What about Keynes law?
If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.