The economy of Winterspring is currently in an equilibrium depicted by point Eo on the graph. Now suppose that there is a demand shock in the economy and the AD curve shifts from AD to AD₁, as shown by the graph. Suppose that there is no monetary validation. Using the point drawing tool, show the short-run equilibrium that the economy will move into in this case. Label this point E₁. Carefully follow the instructions above, and only draw the required objects. Suppose that there is no monetary validation. 1.) Using the three-point curve drawing tool, show the new AS curve in the long-run. Label this curve AS₁. 2.) Using the point drawing tool, show the long-run equilibrium that the economy will move into in this case. Label this point E₂. Price Level (P) 2,400 2,200- 2,000 1,800- 1,600 1,400 1,200- 1,000+ 800- 600- 400- 200- Economy of Winterspring Y" 1.291 0+ 1,000 3,000 A Ш Eot + 5,000 AD ASO AD₁ £7.055 7,000 9,000 11,000 Real GDP (Y)

The economy of Winterspring is currently in an equilibrium depicted by point Eo on the graph. Now suppose that there is a demand shock in the economy and the AD curve shifts from AD to AD₁, as shown by the graph. Suppose that there is no monetary validation. Using the point drawing tool, show the short-run equilibrium that the economy will move into in this case. Label this point E₁. Carefully follow the instructions above, and only draw the required objects. Suppose that there is no monetary validation. 1.) Using the three-point curve drawing tool, show the new AS curve in the long-run. Label this curve AS₁. 2.) Using the point drawing tool, show the long-run equilibrium that the economy will move into in this case. Label this point E₂. Price Level (P) 2,400 2,200- 2,000 1,800- 1,600 1,400 1,200- 1,000+ 800- 600- 400- 200- Economy of Winterspring Y" 1.291 0+ 1,000 3,000 A Ш Eot + 5,000 AD ASO AD₁ £7.055 7,000 9,000 11,000 Real GDP (Y)

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 2SQP

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Draw the AS-AD model for the following scenario: The economy is hit by a negative AD shock. Assume there is no monetary or fiscal policy implemented, and the AD shock is permanent. Make sure to include the initial equilibrium, the short-run equilibrium, and the new long-run equilibrium. Label the axes and the curves.
Please Draw A Graph. In 2007, potential GDP approximately equal actual real GDP. Represent this economic situation with an AS/AD model. (Show the short run equilibrium and where this equilibrium is compared to the long run aggregate supply curve.)
Please write on the space provided what happens to each variable -- indicate whether each variable increases, decreases, or remains unchanged. Please show in the graphs the initial equilibrium, short run equilibrium, and final long run equilibrium. If possible, please provide only two graphs, one for IS-LM and one for AD-AS that show all of the equilibrium positions Suppose the economy is initially in a long-run equilibrium. Starting from this position, assume that an exogenous shock such as the Covid 19 pandemic pushes the economy away from the equilibrium. Using the IS-LM and AD-AS framework, indicate what happens in the short run to output, unemployment, prices, interest rate, consumption, investments, and real money balances, as the economy moves from long-run equilibrium to short-run equilibrium. What economic condition is the economy in after the shock? __________________ Short-run Output ________________ Unemployment _________________ Prices…
Please write on the space provided what happens to each variable -- indicate whether each variable increases, decreases, or remains unchanged. Please show in the graphs the initial equilibrium, short run equilibrium, and final long run equilibrium. If possible, please provide only two graphs, one for IS-LM and one for AD-AS that show all of the equilibrium positions Suppose the economy is initially in a long-run equilibrium. Starting from this position, assume that an exogenous shock such as the Covid 19 pandemic pushes the economy away from the equilibrium. If the government chooses not to intervene in the economy, what will happen to the above variables in the long run? Please indicate in the space below what will happen in the transition from the short run back to the long run equilibrium and the final values of output and unemployment in the long run. Short-run Output __________________ Unemployment ___________________ Prices __________________…
Describe an economic environment which would be characterized by the term "stagflation". Using an AD - AS diagram, depict and given an example of a macroeconomic shock that would take an economy from a long - run equilibrium to a situation of stagflation. Label all points on the graph completely and point out the key characteristics associated with stagflation on your graph.
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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? b. analyze the effects of an oil supply shock that causes a temporary increase in the 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 supply? c. consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. analyze the effects of a decrease in the inflation target from m to mt. explain the mechanism behind the adjustment to the new steady state.
Suppose an economy is initially in equilibrium at its potential level of output. As a result of an unexpected pandemic, the AD curve suddenly shifts to the left by a horizontal distance equal to $304 billion. How much will the output fall as a result of this shift in demand? (Calculate your answer in billions of CAD and write it without units. E.g., write 1 for $1 billion.
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Please no hand written solution For the following events, explain the short-run and long-run effects on output and the price level, assuming policymakers take no action. You need to draw the AD-SRAS-LRAS diagram for the Canadian economy, starting in a long-run equilibrium. Make sure to illustrate its effect using a well-labeled diagram. Assume that there is a large increase in demand for Canadian exports. Show the resulting short-run equilibrium on your graph. In this short-run equilibrium, is the unemployment rate likely to be higher or lower than it was before the increase in exports? Explain it. Explain how the economy adjusts back to long-run equilibrium. When the economy has adjusted back to long-run equilibrium, how would the values of each of the following have changed relative to what they were before the increase in exports? Real GDP The price level (CPI) The unemployment rate
Why does the AD curve slope downward? Why does the AS curve slope upward? How is the AS/AD graph like a standard supply-and-demand dia-gram? How is it diferent?