Consider if in a given economy, the parliament approves an increase in minimum wage. Starting from the medium run equilibrium, when economy is at full employment to discuss the effects of this shock.
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3)- Consider if in a given economy, the parliament approves an increase in minimum wage. Starting from the medium run equilibrium, when economy is at full employment to discuss the effects of this shock.
a)- Using a set of WS/PS
b)- Using the aggregate
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- The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table 24.3 shows. Plot the AD/AS diagram. Identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect concern about inflation in this economy to be relatively high or low? Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. How will the shift in AD affect the original output, price level, and employment?ssume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affected Explain clearly in words the reasons behind the effects on Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply, as pointed out inPart (e) of the following question: Assume that a country’s economy is in long-run equilibrium. (a) Using a correctly labeled graph of aggregate demand, short-run aggregate supply, and long-run aggregate supply, show the short-run equilibrium price level, labeled PL1, and output level, labeled Y1. (b) Assume that increased uncertainty has reduced business orders for equipment. What is the impact of the change in business orders on each of the following in the short run? (i) Aggregate demand. Explain. (ii) Employment (c) Based on the change in business orders, what will happen to the long-run economic growth rate? Explain. (d) Using a correctly labeled graph of the loanable funds market, show the effect of the change in business orders on the real interest rate in the country in the short run. (e) Given the effect on the real interest rate identified in part (d), what will happen to each of the following? (i) The supply of the country’s currency on the foreign…
- Coronavirus pandemic and resultant shutdown measures to contain it have plunged the economies around the world including Singapore into severe contraction. Assuming Singaporean economy was in long run equilibrium in the aggregate demand and supply (AD-AS) model before the pandemic (and consequent shutdown) started, answer the questions below: Now assume that the contraction in the Singaporean economy is mainly driven by supply side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less)Q1. Consider the IS-LM model. Suppose the economy of Economica is initially at the general equilibrium. This year, Economica’s economy is hit by a negative oil price shock, i.e., oil prices in Economica increase dramatically. a. Explain and show graphically how an oil price shock affects the labor, goods, or the asset market. b. Explain and show graphically how an oil price shock affects the short-run equilibrium. c. Explain and show graphically how an oil price shock affects the general (long-run) equilibrium.Assume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affected Explain clearly in words the reasons behind the effects on Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply, as pointed out in
- Assume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affectedCoronavirus pandemic and resultant shutdown measures to contain it have plunged the economies around the world including Singapore into severe contraction. Assuming Singaporean economy was in long run equilibrium in the aggregate demand and supply (AD-AS) model before the pandemic (and consequent shutdown) started, answer the questions below: a) Assuming the contraction in the Singaporean economy is mainly driven by demand side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less) and using a graph. b) Now assume that the contraction in the Singaporean economy is mainly driven by supply side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less) and using a graph.Coronavirus pandemic and resultant shutdown measures to contain it have plunged the economies around the world including Singapore into severe contraction. Assuming Singaporean economy was in long run equilibrium in the aggregate demand and supply (AD-AS) model before the pandemic (and consequent shutdown) started, answer the questions below: a) Assuming the contraction in the Singaporean economy is mainly driven by demand side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less). Graph Explanation b) Now assume that the contraction in the Singaporean economy is mainly driven by supply side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less). Graph Explanation [1] Make sure to label the variables represented on the X-axis and Y-axis of the graph clearly. Also mark the curves in the graphs clearly…
- Coronavirus pandemic and resultant shutdown measures to contain it have plunged the economies around the world including Singapore into severe contraction. Assuming Singaporean economy was in long run equilibrium in the aggregate demand and supply (AD-AS) model before the pandemic (and consequent shutdown) started, answer the questions below: (do not explain what the lines in the graph mean. explain the effects of the respective demand/supply side factors) a. Assuming the contraction in the Singaporean economy is mainly driven by demand side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less)(explain the demand side factors not what the lines in the graph are). b. Now assume that the contraction in the Singaporean economy is mainly driven by supply side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less)(explain the supply side factors not what the lines in the graph are).…question 3Consider the AS-AD and three-equations models of a closed economy discussed in the course.(a). Write down the expressions for the AS and AD curves and interpret the expressions: what is the intuition behind the two curves? What must be true of the model parameters and variables in the long-run equilibrium, i.e. in the steady state?(b). Analyse the effects of an oil supply shock that causes a temporary increase in inflation, using the three-equation model. Assume that the shock lasts for one-period and then assumes the value 2%. Describe the mechanisms that bring the economy back to long-run equilibrium. What happens to aggregate demand?(c). Consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. Analyse the effects of a decrease in the inflation target from ? to ??. Explain the mechanisms behind the adjustment to the new steady state.For Shock E: Suppose the economy starts in the long run equilibrium. Illustrate changes that the shock will cause in the short run (using AD-SRAS). Explain why each curve shifts. Determine how the price level and output will be affected in the short run. Mark the output gap on the diagram. Is the output gap positive or negative? Is the economy is booming, or is it in a recession? On the same diagram illustrate how the economy will adjust to the shock in the long run and explain the mechanism. Determine how the price level and output will be affected in the long run. E. The government raises unemployment benefits As time passes, because of high unemployment the wages in the economy will? (decrease/increase) As a result, the SRAS curve will shift ? (right/left), causing the price level to ? (increase/fall) and output to eventually return to its long run level Y*.
