Aggregate Demand and Aggregate Supply Method 1) Starting Position will be given 2) Shock Demand or Supply 3) Positive or Negative Shift of Demand or Supply 4) Ouput gap i it recessionary or inflationary 5) Demonstrate and explain effects of initial shock on GDP and Price level www.w 6) In the long run, without policy Demonstrate and explain the market response and why. what will happen to GDP and Price Level 1. Assume the economy is in a recession with below average price level. If consumers think the economy will get worse and they decrease spending what will happen in the short and long run. 2. If the economy is in an inflationary gap period with below average price level, what happens in the short and long run if the government increases regulation on the energy sector. 3. If the economy is in a period of stagflation, what happens if the government increases taxes in the long run and short run?

Q: 1.) Use the line drawing tool to show the effects of a positive aggregate demand shock that might…

A: Shift in AD occurs when there is a change in any of its components: C(consumption), I(investment),…

Q: a. How much does aggregate demand need to change to restore the economy to its long run equilibrium?…

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Q: Specific Subject: Macroeconomics - AD and AS Shocks Analyse the case of a negative supply shock…

A: 4. Aggregate demand: It is the sum total of the final value of the goods and services that are being…

Q: QUESTION 4 Exhibit 5-2: The Aggregate Demand and Supply Diagram Long-Run Aggregate Supply Short-Run…

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Q: For Shock H: Suppose the economy starts in the long run equilibrium. Illustrate changes that the…

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A: Answer - Part C Answer - Graph-

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A: Inflation refers to the situation where the general price level is increasing in the economy.

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Q: 1. Which of the following would cause the dynamic DAD (Dynamic Aggregate Demand) curve to shift in…

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Q: An economy experiences an adverse supply shock. a) Draw an AD-AS diagram to illustrate the effect…

A: Aggregate supply refers to the cumulative quantity of a firm's production and selling, or the real…

Q: Question 2. a. What does stagflation mean? b. When does stagflation occur? Use AD-AS diagram. c. How…

A: a)Stagflation is defined by weak economic development and relatively high unemployment, often known…

Q: The slope and position of the long-run aggregate supply curve ppose the Fed doubles the growth rate…

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Q: Illustrate and interpretthe short-run and longrun effects of temporary and permanentsupply shocks

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A: The quantity theory of money:The quanity thory of money equation can be written as follows:

Q: If the short-run aggregate supply curve (SRAS) is horizontal, then an increase in aggregate demand…

A: The correct option for the above-mentioned question is (c).

Q: The central bank decides to raise the money supply; as a result, the interest rate in the economy…

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Q: Suppose an economy is in long-run equilibrium.a. Use the model of aggregate demand andaggregate…

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Q: 1) According to the Phillips Curve, as unemployment falls what happens to inflation? Why?

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Q: Explain why the NBER reported that the 2008 recession began before real GDP had fallen for two…

A: To determine the real GDP the NBER committee calculated the the real GDP and the real GDI (gross…

Q: The economy is in long-run equilibrium. Suddenly, due to corporate scandals, international tensions,…

A: Firstly,  we should know what is pessimism: Pessimism is defined by the American Psychological…

Q: PLEASE ANSWER ALL PARTS OF QUESTIONS 1 AND 2.

A: Hey, Thank you for the question. According to our policy we can only answer up to 3 subparts per…

Q: Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if…

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Q: long-run equilibrium.

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Q: 1. In the RBC (Real Business Cycle) model, if businesses react to a pessimistic outlook and decrease…

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Q: An economy has: R = 10 +.ly, C= 14 +9YD, G= 25, 1 = 75 -r, NX = 30 – 06y - .5p, MD = .25y -r, MS =…

A: We are going to answer this question with the help of diagram and by solving for Aggregate demand…

Q: If the economy begins at an equilibrium at potential output, a negative aggregate demand shock has…

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Q: Question 32 Assume the economy is in short-run macro-equilibrium at E1. If the economy is allowed to…

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Q: (Figure: Determining Long-Run and Short-Run Economic Shifts) Starting at point J, the economy will…

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Q: (g) Assume that the economy is now initially at equilibrium point Y, where the AD ; intersects the…

A: (g) Assume that the economy is now initially at equilibrium point Y, where the AD2 intersects AS2.…