Macroeconomics (9th Edition)
9th Edition
ISBN: 9780134167398
Author: Andrew B. Abel, Ben Bernanke, Dean Croushore
Publisher: PEARSON
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Chapter 10, Problem 6NP
To determine
To describe: Any large cycle in output produced by small shock.
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(Supply Shocks) Give an example of an adverse supply shock and illustrate graphically. Now do the same for a beneficial supply shock.
Why, in general, do shocks force people to make changes? Give at least two examples from your own experience.
Complete the following questions using the 6-quadrant diagram showing the effects of each shockbelow. For each shock explain and show- Explain how the shock affects the model (what changes?)Then show- What happens to output (real GDP)- What happens to the Price level P- What happens to real wages (w/P)- What happens to real Capital payments (R/P)Who is better or worse off after the shock: labor, capital owners, or both and explain yourreasoning.
c) A sudden pandemic occurs in an economy that results in a large loss of life.d) A large increase in the level of taxation in the economy.e) An increase in the money supply in the economy.
Do any of the shocks above illustrate the classical dichotomy (that nominal changes only have nominalbut not real effects)? If so, which ones?
Chapter 10 Solutions
Macroeconomics (9th Edition)
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