3. Suppose an economy is in long run equilibrium. 3.1 use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both short run and long run aggregate supply. 3.2 The central bank raises the money supply by 5 percent. Use your diagram to show that what happen to output and the price level as the economy moves from the initial to the new short run equilibrium (Call it point B). 3.3 Now show the new long-run equilibrium (call it point C). what cause the economy to move from point B to point C
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- 2. Suppose an economy is in long run equilibrium. 2.1 use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). if GDP is below a potential GDP. Be sure to include both short run and long run aggregate supply. 2.2 The central bank raises the money supply by 5 percent. Use your diagram to show that what happen to output and the price level as the economy moves from the initial to the new short run equilibrium (Call it point B). 2.3 Now show the new long-run equilibrium (call it point C). what cause the economy to move from point B to point C?Suppose an economy is in long-run equilibrium. a. Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both short-run and long-run aggregate supply. b. The central bank raises the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (call it point B). c. Now show the new long-run equilibrium (call it point C). What causes the economy to move from point B to point C? d. According to the sticky-wage theory of aggregate supply, how do nominal wages at point A compare to nominal wages at point B? How do nominal wages at point A compare to nominal wages at point C? e. According to the sticky-wage theory of aggregate supply, how do real wages at point A compare to real wages at point B? How do real wages at point A compare to real wages at point C? f. Judging by the impact of the money supply on nominal…Suppose an economy is in long-run equilibrium.a.Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium(call it point A).be sure to include both short-run and long-run aggregate supply.b.The central bank raise the money supply by 5 percent.Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium.(call it point B)c.Now slow the new long-run equilibrium(call it point C).what causes the economy to move from point B to point C?d.According to the sticky-wage theory of aggregate supply,how do nominal wages at point A compare to nominal wages at point B?How do nominal wages at point A compare to nominal wages at point C?e.According to the sticky wage theory of aggregate supply,how do real wages at point A compare to the real wages at point B?How do real wages at pointA compare to the real wages at point C?f.Judging by the impact of the money supply on nominal and real…
- QUESTION 4 Chapter 14 Suppose economy is in long run equilibrium. [Only one diagram is required for this question, draw and label clearly to show all relevant points and moves, if more than one diagrams are drawn for this question, I will give a zero grade for this question] a. Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both-short run and long-run aggregate supply. b. The central bank raises the money supply by 10%. Use the diagram you drew in part a) to show what happens to output and price level as the economy moves from initial equilibrium A to the new short-run equilibrium (call it point B). Explain all the details about the changes that happen due to increase in money supply and how these changes affect the model. c. Show how economy moves from the short run equilibrium (point B) to the new long- run equilibrium (call it C) and explain why it moves to C. d. According to sticky wage theory of…The graphs illustrate an initial equilibrium for the economy. Suppose that the Federal Reserve raises interest rates. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run. Aggregate price level Short-run graph GDP In the short run, the price level LRAS Real GDP SRAS Short-run equilibrium AD and Aggregate price level Long-run graph LRAS Real GDP In the long run, the price level GDP SRAS Long-run equilibrium AD andChapter 20 Homework 1 Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 105. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 95, 100, 105, 110, and 115. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 10 20 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 AS LRAS The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the price
- Explain what will happen as a result of the following events. In each case, draw an aggregate demand and short-run aggregate supply diagram showing the initial equilibrium output level (YO) and price level (PO). Show any changes, indicate the final equilibrium output level and price level and explain briefly. a. The economy is in a recession. An increase in government purchases occurs. The Fed tries to maintain the interest rate. b. The economy is operating near full capacity. Now environmental pollution standards are tightened substantially.Assume that you live in a country that is a major importer of Russian oil. How will the Russian invasion of Ukraine and subsequent international sanctions against Russian exports affect your nation. a. What curve would shift first in an Aggregate Demand Aggregate Supply model for your country? b. How would the aggregate price level and aggregate output level change in the short run? What is this phenomenon called?9. Suppose an economy is in long-run equilibrium.Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both short-run and long-run aggregate supply.The central bank raises the money supply by 5%. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (call it point B).Now show the new long-run equilibrium (call it point C). What causes the economy to move from point B to point C?According to the sticky-wage theory of aggregate supply, how do nominal wages at point A compare to nominal wages at point B? How do nominal wages at point A compare to nominal wages at point C? According to the sticky-wage theory of aggregate supply, how do real wages at point A compare to real wages at point B? How do real wages at point A compare to real wages at point C? Please only answer F. F.) Judging by the impact of the money supply on nominal…
- 9. Suppose an economy is in long-run equilibrium. Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both short-run and long-run aggregate supply. The central bank raises the money supply by 5%. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (call it point B). Now show the new long-run equilibrium (call it point C). What causes the economy to move from point B to point C? D.) According to the sticky-wage theory of aggregate supply, how do real wages at point A compare to real wages at point B? How do real wages at point A compare to real wages at point C? E.) Judging by the impact of the money supply on nominal and real wages, is this analysis consistent with the proposition that money has real effects in the short run but is neutral in the long run?9. Suppose an economy is in long-run equilibrium. Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both short-run and long-run aggregate supply. The central bank raises the money supply by 5%. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium (call it point B). Now show the new long-run equilibrium (call it point C). What causes the economy to move from point B to point C? D.) According to the sticky-wage theory of aggregate supply, how do real wages at point A compare to real wages at point B? How do real wages at point A compare to real wages at point C? Please only answer E.) E.) Judging by the impact of the money supply on nominal and real wages, is this analysis consistent with the proposition that money has real effects in the short run but is neutral in the long run?The figure given below represents the long-run equilibrium in the aggregate demand and aggregate supply model. Suppose that the economy is initially at equilibrium point D in the accompanying figure. Figure 16 Refer to Figure 16. Suppose major oil-exporting countries increase oil output, thus decreasing the price of oil. In the figure this would be represented by: a movement from A to C. a movement from D to C. a movement from A to B. a movement from D to B. a movement from B to D.