Suppose, initially the Australian economy is at full employment (in other words the economyis at the potential GDP). Using AD-AS model, explain how would each of the following eventsaffect the economy both in the immediate and in the long term. A slowdown in China’s economic growth due to the sub-prime crisis in the US.

Suppose, initially the Australian economy is at full employment (in other words the economyis at the potential GDP). Using AD-AS model, explain how would each of the following eventsaffect the economy both in the immediate and in the long term. A slowdown in China’s economic growth due to the sub-prime crisis in the US.

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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Suppose, initially the Australian economy is at full employment (in other words the economy is at the potential GDP). Using AD-AS model, explain how would each of the following events affect the economy both in the immediate and in the long term. A slowdown in China’s economic growth due to the sub-prime crisis in the US. b) Union wage settlements push the wage rate up. c) An increase in consumer confidence.
Use the AD - AS model in the figure below to answer the following questions. Suppose the economy is currently experiencing an inflationary gap, without any government policy intervention, the economy would move from ◻ a) C to D b) B to A c) C to B d) A to E e) E to A
Use the AD-AS model to explain the impact of a general increase in productivity on the general price level and the level of real production and income in the economy
Assume there is a particular short-run aggregate supply curve for an economy and the curve is relevant for several years. Use the AD-AS analysis to show graphically why higher rates of inflflation over this period would be associated with lower rates of unemployment, and vice versa. What is this inverse relationship called?
During 2000, there was a sharp reduction in stock prices and a sharp increase in the world price of crude oil. How will aggregate demand and aggregate supply in the United States be influenced by these two factors? Using the AD-AS model, explain the expected impact on output.
Which of the following is Aggregate Demand (AD) directly related to in an AS/AD model? a) inflation, b) C + I + G + XN c) Government spending d(none of the above)