Graph and explain the classical AD/AS curve, detail what determines the level of nation output and...
EQUILIBRIUM OUTPUT AND EMPLOYMENT 1. Derive the aggregate supply curve in the classical case. (Draw on the critical assumptions of classical economists in your explanation). 2. Within the classical model, analyze the following changes to the output equilibrium, price, real wage and employment: (a) decrease in technology (b) influx of foreign workers (c) decrease in money supply. 3. What is the role of money supply in classical theory? If money supply declines, what are the effects on income and price?...
What determines the unemployment rate in the short Run? Explain using the Classical model, Keynesian model or Phillips curve.
Explain why the equilibrium level of output (GDP) in the Keynesian system can be determined at the level of output that is below the full-employment level output whereas the equilibrium level of output in the classical system is determined at the full-employment level of output?
If the price level decreases, then aggregate demand increase along the AD curve but the curve doesn’t shift. a. True b. False The Long-run Aggregate Supply Curve (LRAS) can shift to the right because of: a. Discovery of more natural resources b. Development of more efficient technology c. Inviting more labor force through Immigration d. All of the above Which of the following may happen due to a crash in the stock market: a. AD curve may shift to the...
On the following graph, draw the aggregate demand (AD) and aggregate supply (AS) curves using the data in the table that lead to a full-employment equilibrium and then answer additional questions: Instructions: Use the tools provided 'AD,' and 'AS' to draw the demand curve (AD1) and the supply curve (AS). Each curve should contain 10 reference points. Price Level Real Output Real Output Demanded Supplied (5) 140 600 700 1,200 1,150 1,100 1,050 (1250, 105) Price Level (Prey 1 of...
1. How will a change in taxation impact the AD curve? Explain and graph. 2. What are the reasons why tax revenue increases and beyond a certain tax rate, decrease?
Assume that the US economy is initially at equilibrium with the intersection of AD curve, LRAS curve and SRAS curve. Explain, using diagram, how a boom in the stock market will affect the initial equilibrium and the following macroeconomics variables: Output, Price, and employment. Using the diagram explain how the Fed should respond to this situation in order to stabilize output and employment.
Consider the following extended classical economy (in which the misperceptions theory holds): AD SRAS Okun's Law Full employment output Natural unemployment rate Y- 300 10(MIP) Y 550 u = 0.09 Suppose that the money supply M 1,200 and that the expected price level, Pe, equals 40. What are the short-run equilibrium values of: The price level (P: 40 Enter the value rounded to one decimal place. Hint: You will need to use factoring or the quadratic formula and choose the...
Regarding the AS-AD Curve: Write down the relationship between the price level and output in the sticky wage model of aggregate supply. Describe what happens to real wages if the economy goes into a recession. Is this prediction supported by empirical evidence?
Assume an economy operating below full employment. Draw a correctly labeled AD/AS graph showing: the problem in the economy current price level and output full employment output Identify an open market operation that the Fed could implement to resolve the problem. Using a correctly labeled money market graph with a side-by-side investment demand graph, show the effect of the policy you identified in part B on each of the following: nominal interest rates quantity of investment demanded On your graph...