Draw an AD/AS model in purely competitive long run initial equilibrium. Label the price level P*=100and YF=10. Label the SRAS1 and the AD1 curve. Label the LRAS1 curve. Be sure to also label bothaxis correctly.]Draw a graph of the "business cycle." Show the long run growth trend line (put a trend percentage the"makes sense") and the cyclical curve around that trend line. Be sure to also label both axis correctly.Label point A on both graphs in #1 and #2 above. Then on graph in #1, indicate the full employment level(i.e., the "usual" unemployment rate in LR initial equilibrium) at point A for YF* (at full potential output)in initial equilibrium.Assume an Increase in AD for any reason (increase in Aggregate Demand) and show it on graph #1above. Then, Label point B on all applicable graphs above (after the increase in AD), at the intersection ofthe new equilibrium.-is point B a Short run or Long run equilibrium point?-Indicate the new unemployment rate at Point B that makes sense at YF2 and P2 (at the new equilibriumat point B) on the graph in #1. Also, use numbers for YF2 and P2 CPI that "make sense" on the graph in#1 above.indicate new numbers for point B that Make sense for the Nominal GDP growth equation (in #4 above)and business cycle (#2 above)write out the equation for GDP for the Expenditure approach that = Output = YF=AD= GDPwrite out the equation for Nominal GDP growth (use numbers that "make sense" for Point A, Point B,Point C like we did in class)-Equation:-Point A:-Point B:-Point C:

Draw an AD/AS model in purely competitive long run initial equilibrium. Label the price level P*=100 and YF* 10. Label the SRAS1 and the AD1 curve. Label the LRASI curve. Be sure to also label both axis correctly.]

Draw an AD/AS model in purely competitive long run initial equilibrium. Label the price level P=100 and YF 10. Label the SRAS1 and the AD1 curve. Label the LRASI curve. Be sure to also label both axis correctly.]

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter11: Fiscal Policy: The Keynesian View And Historical Development Of Macroeconomics

Section: Chapter Questions

Problem 1CQ

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Question

Draw an AD/AS model in purely competitive long run initial equilibrium. Label the price level P*=100
and YF=10. Label the SRAS1 and the AD1 curve. Label the LRAS1 curve. Be sure to also label both
axis correctly.]
Draw a graph of the "business cycle." Show the long run growth trend line (put a trend percentage the
"makes sense") and the cyclical curve around that trend line. Be sure to also label both axis correctly.
Label point A on both graphs in #1 and #2 above. Then on graph in #1, indicate the full employment level
(i.e., the "usual" unemployment rate in LR initial equilibrium) at point A for YF* (at full potential output)
in initial equilibrium.
Assume an Increase in AD for any reason (increase in Aggregate Demand) and show it on graph #1
above. Then, Label point B on all applicable graphs above (after the increase in AD), at the intersection of
the new equilibrium.
-is point B a Short run or Long run equilibrium point?
-Indicate the new unemployment rate at Point B that makes sense at YF2 and P2 (at the new equilibrium
at point B) on the graph in #1. Also, use numbers for YF2 and P2 CPI that "make sense" on the graph in
#1 above.
indicate new numbers for point B that Make sense for the Nominal GDP growth equation (in #4 above)
and business cycle (#2 above)
write out the equation for GDP for the Expenditure approach that = Output = YF=AD= GDP
write out the equation for Nominal GDP growth (use numbers that "make sense" for Point A, Point B,
Point C like we did in class)
-Equation:
-Point A:
-Point B:
-Point C:

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