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

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

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 11P

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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? a. Real GDP b. The price level (CPI) . c. The unemployment rate
State what economic policies (fiscal AND monetary) should be enacted to stabilize the economy. Clearly state your reasons for choosing these policies. What the results of these economic policies look like in the short-run and long-run. In this section, include an AD-AS Model graph that shows the results of your recommended economic policies.
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…
What are the results of economic policies in Mexico and what do they look like in the short-run and long-run? Include an AD-AS Model graph that shows the results of your recommended economic policies.
Hello Can you help me out. Use the AD/AS model to illustrate the following. Draw 6 graphs by hand. Show how the AD or the AS curve shift and in what direction (left or right). Also state what happens to equilibrium real GDP (Y), employment, and the equilibrium price level. [Note: Use the SRAS curve, not the LRAS.] A. an increase in government spending and/or transfer payments B. restrictive fiscal policy C. expansive monetary policy D. increase in investment according to Keynesians E. increase in investment according to supply-side economists F. a stock market crash
Explain the likely impact of spending on infrastructure on output in the long-run and show this on your AS-AD diagram.
The table below shows information on aggregate supply, aggregate demand and the price level for the imaginary country of Xurbia. Price Level AD AS 110 700 600 120 690 640 130 680 680 140 670 720 150 660 740 160 650 760 170 640 770 Plot the AD/AS diagram from the data shown (Don't have to show graph but do draw it to help you answer the questions). a. Identify the equilibrium. b. Imagine that as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium. c. How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?
Suppose firms are optimistic about the outlook of the economy and they decide to increase investment. Also suppose that, simultaneously, there is a reduction in business taxes. Use the AD-AS graph to show what happens to the price level and output as a result.
Create a graph that shows where Mexico currently is on the business cycle. Be sure to include an AD-AS Model graph that shows if the economy is currently experiencing a recessionary gap, expansionary gap, or long run equilibrium.
Suppose concerns about the size of the federal budget deficit lead theU.S.Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model Figure 8.3 U.S. Price Level B O AD, toAD; O AD, to AD₂ O AD₂ to AD₁ O AS, to AS; AS; to AS₂ 100 200 300 400 AS3 AS₁ AD₂ 500 Real GDP (billions of dollars) AD AS₂ AD3 In Figure 8.3, which of the following shifts would result in stagflation (economic stagnation and inflation)?
In the year 2020, aggregate demand and aggregate supply in the fictional country of Drooble are represented by the curves AD2020AD2020 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2021. The first potential aggregate demand curve is given by the ADAADA curve, resulting in the outcome illustrated by point A. The second potential aggregate demand curve is given by the ADBADB curve, resulting in the outcome illus- trated by point B. PRICE LEVEL 108 107 106 105 104 103 102 101 100 0 AD 2020 2 ■ 4 B AS 6 8 10 OUTPUT (Trillions of dollars) ADA ADB 12 14 16 ? Suppose the unemployment rate is 6% under one of these two outcomes and 5% under the other. Based on the previous graph, you would expect to be associated with the higher unemployment rate (6%). If aggregate demand is low in 2021, and the economy is at outcome A, the inflation rate between 2020 and 2021 is Based on your answers to the previous questions, on the following graph use…