Analysis of ad-as model

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Reference no: EM1313739

a) What is the main policy message of the AS-AD model, and how does it relate to the 1930s Keynesian revolution in economic theory?

b) Provide as AS-AD graph of an economy in a deep recession and show the role of expansionary policy. (You need not go through all the details; just show and explain the basic shifts and why.)

c) Related to the above question, why does AS-AD analysis of expansionary fiscal and monetary policy effectiveness typically begin with the economy at the natural rate of unemployment (NRU)?

d) What should today's policy-makers assume about the natural rate of unemployment?

Reference no: EM1313739

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