Presentation top top theme: "Assume the the joined States economic climate is at this time in a recession in a short run equilibrium."— Presentation transcript:

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2 Assume that the united States economic climate is currently in a recession in a quick run equilibrium.Draw a correctly labeled graph that a long-run aggregate supply, short-run aggregate supply, and aggregate demand, and show every of the following. (i) present equilibrium output and price level, labeled together Y1 and PL1 (ii) full employment output, labeling Yf

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3 Assume that the unified States economic climate is right now in a recession in a brief run equilibrium.Draw a correctly labeled graph of a long-run accumulation supply, short-run accumulation supply, and accumulation demand, and also show every of the following. (i) present equilibrium output and also price level, labeled as Y1 and PL1 (ii) complete employment output, labeled Yf LRAS Price Level SRAS PL1 advertisement Y1 Yf genuine GDP

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4 (b) to balance the commonwealth budget, intend that the federal government decides come raise earnings taxes while preserving the current level of federal government spending. Top top the graph attracted in part (a), display the result of the boost in taxes. Brand the new equilibrium output and also price level Y2 and also PL2, respectively. LRAS Price Level SRAS PL1 ad Y1 Yf genuine GDP

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5 (b) to balance the commonwealth budget, suppose that the government decides come raise income taxes while preserving the present level of government spending. On the graph drawn in part (a), display the effect of the increase in taxes. Brand the new equilibrium output and also price level Y2 and also PL2, respectively. LRAS Price Level SRAS PL1 ad Y1 Yf actual GDP

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6 (b) to balance the federal budget, intend that the federal government decides to raise income taxes while keeping the current level of government spending. On the graph attracted in component (a), show the impact of the increase in taxes. Brand the brand-new equilibrium output and also price level Y2 and PL2, respectively. LRAS Price Level SRAS PL1 PL2 AD1 advertisement Y2 Y1 Yf genuine GDP

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7 (c) draw a properly labeled graph of the short-run and also long-run Phillips curves. Use the letter A to brand a suggest that could represent the present state the the economy in recession.

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8 (c) attract a properly labeled graph that the short-run and long-run Phillips curves. Use the letter A to brand a allude that might represent the present state of the economic climate in recession. LRPC inflation SRPC unemployment

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9 Draw a properly labeled graph of the loanable funds market for the UDraw a effectively labeled graph that the loanable funds sector for the U.S. Label the equilibrium interest price as r1 and the quantity of funds a qlf1.

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10 Draw a appropriately labeled graph that the loanable funds industry for the UDraw a appropriately labeled graph the the loanable funds market for the U.S. Brand the equilibrium interest rate as r1 and also the quantity of accumulation a qlf1. Interest price Slf r1 D lf Qlf1 Q loanable funds

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11 Draw a effectively labeled graph of the loanable funds sector for the UDraw a properly labeled graph the the loanable funds market for the U.S. Label the equilibrium interest rate as r1 and the amount of accumulation a qlf1. Interest rate Slf r1 D lf Qlf1 Q loanable funds

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12 Draw a effectively labeled graph the the loanable funds market for the UDraw a properly labeled graph of the loanable funds industry for the U.S. Label the equilibrium interest price as r1 and also the quantity of accumulation a qlf1. (i) Assume the the policy devices pursue a fiscal policy to stimulate the economy. They decide to rise spending if holding count constant. To money the boost in spending lock will rise borrowing. On her graph in component (d), display the affect of this policy action on the attention rate and also quantity that funds. Brand the brand-new equilibrium interest price r2 and the brand-new quantity of funds qlf2. Interest rate Slf r1 D lf Qlf1 Q loanable funds

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13 Draw a appropriately labeled graph of the loanable funds market for the UDraw a properly labeled graph the the loanable funds sector for the U.S. Label the equilibrium interest price as r1 and also the quantity of funds a qlf1. (i) Assume the the policy equipments pursue a fiscal policy to wake up the economy. They decide to rise spending while holding taxes constant. To fund the rise in spending they will increase borrowing. On your graph in part (d), display the affect of this policy activity on the interest rate and quantity that funds. Brand the new equilibrium interest rate r2 and the new quantity of accumulation qlf2. Interest price Slf r2 r1 D lf1 D lf Qlf1 Qlf2 Q loanable funds

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14 They will decrease or be crowded outGiven her answer in part (d)(i), just how will exclusive sector investment expenditures be affected? They will certainly decrease or be crowded out Interest price Slf r2 r1 D lf1 D lf Qlf1 Qlf2 Q loanable funds

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15 instead of utilizing fiscal policy, assume the federal Reserve uses monetary policy to wake up the economy. What open-market policy need to the federal Reserve implement? Buy binding (ii) utilizing a properly labeled graph the the money market, show how the plan in part (e)(i) affects nominal interest rates.

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16 (ii) using a properly labeled graph that the money market, present how the plan in component (e)(i) affects nominal attention rates. Sm Sm1 Interest rate r1 r2 D money Qm Qm1 Q money

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17 using a effectively labeled graph the the money market, show how the plan in part (e)(i) affects nominal attention rates.


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What will be the affect of the plan on the price level? describe HINT – think around AD/AS --- to express to following slide Sm Sm1 Interest price r1 r2 D money Qm1 Qm2 Q money

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18 What will be the influence of the policy on the price level? ExplainPrice level boosts LRAS Price Level SRAS PL1 advertisement Y1 Yf genuine GDP

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19 (f) rather of utilizing open market operations, assume the the federal Reserve targets a new federal funds rate to reach complete employment. Must the commonwealth Reserve target a higher or reduced federal accumulation rate? reduced

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