Explain the short and the long-run effects on real output

Assignment Help Corporate Finance
Reference no: EM13403

1. The approved budget for 1997, reduced government spending in housing and urban development, health and human service, and education. Ignoring any other modifications, how would Classical and Keynesian economists explain the short and the long-run effects on real output, price, and unemployment?

2. The vertical long run AS curve compatible with classical economics implies that AD only determines the price level. Keynesians insist that the AD affect output and employment, but not the price level. What differences in assumption about prices partially account for these different perspectives?

3. Find the aggregate supply curve when:

a. The production function is Q = 3LK, labor demand Ld = 10-2w/p, labor supply is Ls = 4w/p, and capital stock in the economy is fixes at K = 4.

b. Is the AS curve derived in "a" representative of the classical, Neo-Classical, or extreme Keynesian cases?
c. How would your answer to "a" and "b" change if the real wage were fixed at 3?

4. Derived the equilibrium price level and output for an economy with the following characteristics:

a. Consumption is C = 10-5p, investment I=20, government spending is G = 15, aggregate supply is Qs=5+p.

b. What happens to production and prices if government spending rises to G = 25? c. How would your answer to "a" and "b" change if AS were Qs = 10?

5. If the national product of a country grew by 10% without inflation, and total expenditures grew by 5%. By how much has the money supply grown? Do these results support the neutrality of money argument? Explain.

6. During the early 1980s, the United States experienced both increases in the price level and reductions in the levels of production and employment. How can the AS-AD model explain this situation? What would have happened if the government increased its spending to ameliorate the decline in production?

7. An important macroeconomic issue that countries are facing is the integration trend all over the world. More specifically, the EU short and long-term effects in the US have been the source of disagreement among economists. In the short-run, they agree on a recessionary impact in the economy. Would classical and Keynesian economists agree in an increase of unemployment as well? Would they agree in the long-term effects? Show your answer with graphs. Be sure to explain the assumptions and mechanisms by which you arrive to your answer.

8. During the last two weeks, the dollar rose against the euro after US stocks rose and Germany's central bank left interest rates unchanged. Rising stocks help the dollar because investors need dollars to buy US securities. In addition, Germany's record-low interest rates boost the dollar by making euro-denominated deposit rates less attractive. Would classical and Keynesian economists agree in the impact that a rising dollar would have on real output? Would they agree in the long-term effects? Show your answer with graphs. Be sure to explain the assumptions and mechanisms by which you arrive to your answer.

9. Consider an economy described by the following equations: Q = 5,000; G=1,000, T= 1,000, C= 250 + 0.75 (Q-T), I = 1000 - 50 r

a. Compute private, public, and national savings.

b. Find the equilibrium interest rate.

c. What would the new national savings be if G rises to 1,250?

d. What is the impact of "c" on interest rates? Is there any crowding out effect?

Reference no: EM13403

Previous Q& A

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Write a profile

Write a profile on bishop poleni.

  Model a discrete-time system

To understand di erent signal models To be able to model a discrete-time system and design simple signal processing algorithms.

  Financial assessment of mk robe-stones limited business plan

Financial Assessment of MK Robe-Stones Limited Business Plan.

  Generate descriptive statistics

Generate descriptive statistics. Create a stem-and-leaf plot of the data and box plot of the data.

  Supply chain network design for cwc

This assignment explain the supply chain management process of cwc. What is the current annual supply chain cost?

  Determine the necessary shell temperature

In a shell-and-tube heat exchanger, one fluid passes through a central tube while another fluid flows through an outer shell in the opposite direction. The purpose is to heat the fluid passing through the central tube.

  Hydraulic behaviour in open channel

Describe how test flumes and associated equipment are used to assess and confirm hydraulic behaviour in open channel

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Finite-state machine design

Create a finite-state machine design to turn your FPGA development board into a simple programmable music box.

Reviews

Write a Review

 

Similar Q& A

  Impact of the global economic crisis on business environment

This paper reviews the article of ‘the impact of the global economic crisis on the business environment' that is written by Roman & Sargu (2011).

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd