HomeworkLib
Question

MacroeconomicsDiscussion Topic: Thinking back to the discussion on the state of the macroeconomy, would you describe the economy as booming, recovering, or in recession during the last few years? Why? Use the AD/AS model to illustrate this graphically. Which curve do you think caused the change? Explain your reasoning

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

There are several changes the economy has experienced in last few years. These include a rightward shift of the AD curve that has raised GDP beyond potential GDP level. Possible reasons are tax cuts and easy monetary policy. Inflation is under control and actual rate of unemployment is less than its natural rate. These facts show that economy is in an expansion phase/it is booming  

Current data related to the US economy as of Q2 of 2018 Price level LRAS SRAS . Potential Real GDP- 17.495 trillion . Real GDP current- 18.511 trillion . Unemployment rate current-3.9% . Natural unemployment rate 4.62% Inflation rate (% change in CPI from previous year) 2.62% 251 . Current CPI 250.5 The analysis suggests that economy has surpassed its full employment level since inflation is more than its target level of 2%, unemployment is lower than its natural rate and real GDP is greater than potential GDP. Hence there is an inflationary gap. We recommend that the government should control the gap by using fiscal contraction. This can take the form of increased taxes and reduced spending on goods and services which would shift the AD to the left, reducing price and real GDP. This will eliminate the inflationary gap AD 17.5 18.5 Real GDP (trillions)

0 0
Add a comment
Know the answer?
Add Answer to:
Macroeconomics Discussion Topic: Thinking back to the discussion on the state of the macroeconomy, would you...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1. While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 quarters.

    While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 quarters. Once you’ve looked at the data, can you draw conclusions about the state of the economy? Would you describe the economy as booming, recovering, or in recession during the last few years? Why? Use the AD-AS model...

  • While over the long run, the economy grows about 2 to 3% per year on average,...

    While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 months. What conclusions about the state of the economy? Would you describe the economy as booming, recovering, or in recession during the last few years? Why? Use the AD-AS model to describe the economy. Which curve...

  • Welcome to Macroeconomics! In this first discussion activity, you will select a relevant macroeconomic topic and...

    Welcome to Macroeconomics! In this first discussion activity, you will select a relevant macroeconomic topic and explore it to identify basic concepts. You can choose a topic such as Gross Domestic Product (GDP), Real GDP, GDP per capita, population, inflation, interest rates, unemployment, fiscal and monetary policy, the Federal Reserve, the Federal Government, poverty, or the Human Development Index (HDI). Locate a recent article or event (published within the last year) that highlights your selected macroeconomic topic. Use the Hunt...

  • 1) Thinking back to the business cycle discussion, how would Keynesian economists explain the performance of...

    1) Thinking back to the business cycle discussion, how would Keynesian economists explain the performance of the economy during the last few years? What has happened to aggregate demand? 2) Next, how would neoclassical economists explain the performance of the economy during the last few years? What has happened to aggregate supply?

  • osdssments1Ools Resources iscussions ListView Topic Discussion 3: Corporate Income Tax Cuts 9 11:30 PM EST. Available...

    osdssments1Ools Resources iscussions ListView Topic Discussion 3: Corporate Income Tax Cuts 9 11:30 PM EST. Available before Sunday, February 17, 201 Subscribe The new tax law dramatically decreases corporate income tax rates. Use the AD/AS model to analyze the likely impact of the tax cuts on the macroeconomy. Show graphically and explain your reasoning. What happens to GDP and the aggregate price level? Why? Do you believe that this tax cut will help the country as a whole? Why? Please...

  • macroeconomics Fiscal Policy In Class Assignment You are hired by the president who believes that the...

    macroeconomics Fiscal Policy In Class Assignment You are hired by the president who believes that the economy is operating at a level of $3.2 trillion and that the potential output is $3 trillion. You are told that the national marginal propensity to consume (MPC) is 0.8. What type of government intervention might you recommend, if any? Discuss how this fiscal policy can be implemented through a change in government spending (how much should government spending change). Show your answer graphically...

  • Refer back to the interview and evaluation you conducted in the Topic 2 Family Health Assessment...

    Refer back to the interview and evaluation you conducted in the Topic 2 Family Health Assessment assignment. Identify the social determinates of health (SDOH) contributing to the family's health status. In a 750-1,000-word paper, create a plan of action to incorporate health promotion strategies for this family. Include the following: Describe the SDOH that affect the family health status. What is the impact of these SDOH on the family? Discuss why these factors are prevalent for this family. Based on...

  • Topic : Monopolistic Competition Suppose you manage a local grocery store, and you learn that a very popular nati...

    Topic : Monopolistic Competition Suppose you manage a local grocery store, and you learn that a very popular national grocery chain is about to open a store just a few miles away. Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). What will happen to your profits? Please show graphically and explain your reasoning in detail. For...

  • Discussion Board Post: You would think that the value of strategic planning would be well established...

    Discussion Board Post: You would think that the value of strategic planning would be well established and without controversy; not so. There are a few scholars who think that the environment is often too dynamic to establish effective strategic plans. In addition, many feel that the plan can be a restriction on innovation. In other words, a firm, community, region, state, or nation becomes entrenched in a specific strategic plan that it cannot adjust to change or innovate. The controversy...

  • 1.While you do not have to state any of the definitions, you should have a conceptual...

    1.While you do not have to state any of the definitions, you should have a conceptual understanding of each key term and key concept. For example, how are marginal benefits and marginal costs related to making decisions at the margin? How can we compare marginal benefits and marginal costs to determine efficiency? What is an unintended effect? What does “ceteris paribus” thinking mean? 2.What is a production possibilities frontier (PPF)? Which points on the frontier illustrate production that is efficient?...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT