Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 15, Problem 4E
(a)
To determine
The impact of decline in government purchases on the labor market.
(b)
To determine
The impact of decline in government purchases on the labor market when prices are rigid in nature.
(c)
To determine
Impact of increase in government purchase in the labor market in relation with impulse response functions.
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Between 2007 and 2009, the United States experienced a severe financial crisis and economic downturn commonly known as the Great Recession. Starting in 2006, housing values fell 30%, causing losses in mortgage-backed securities for families and financial institutions. The recession was marked by a drop in aggregate demand that caused a decline in GDP and an increase in unemployment.
QUESTIONS
How did the AD/AS equilibrium change over time? Support your claims by referring to your AD/AS model.
Select an economic factor (GDP, unemployment, price level) and explain what impact any shifts in AD or AS (or both) had on your chosen factor.
Using the 3-equation model provide a detailed period by period description of theadjustment process for the following scenarios:(a) The economy is hit by a temporary inflationary shock (b) The economy is hit by a permanent positive aggregate demand shock
Using the 3-equation model and provide a detailed period by period description of theadjustment process for the following scenario:The economy is hit by a permanent positive aggregate demand shock
Chapter 15 Solutions
Macroeconomics (Fourth Edition)
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