Sectoral shock and adjustment in long run equilibrium

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Reference no: EM1314546

1. Monetary Intertemporal Model

Assume that last year there was a sectoral shock in Canada, and the economy has already adjusted to the new short-run equilibrium. On the goods market, the labour market and the money market diagrams, illustrate the economy's adjustment to its long run equilibrium only, as the formerly dislocated (and now retrained) labour force is finding employment in new industries.

2. Money surprise model

Show the effect of a fully anticipated increase in government expenditure on all three markets using respective diagrams.

3. Real Business Cycle Model

Suppose that a change in preferences has made consumers less frugal they are now willing to purchase more at every level of income and at every interest rate. Illustrate on all three market diagrams.

Reference no: EM1314546

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