Solution-Short-run and long-run effects

Short-run and long-run effects

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Consider a macro economy was initially at equilibrium level of real GDP. Using an aggregate demand and aggregate supply diagram or model of the economy, graphically illustrate and discuss the short-run and long-run effects of the following events upon the economy:

(a) The Central Bank within the economy reduces interest rates.

(b) There is an increase in private domestic investment spending.

An increase in international oil prices.

Depreciation in the foreign exchange rate value of the economy's currency.

A fall in real estate prices in the capital cities of the country in question (hint: think of the effect upon one's wealth level)

The country main exports rise in price while the goods the country imports from abroad fall in price i.e. its terms of trade improves in the country' favour.

Reference no: EM131194910

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Short-run and long-run effects

Reference no: EM131194910

Reference no: EM131194910

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