Explain what will happen in long run due to self-correction

Assignment Help Business Economics
Reference no: EM131380807

Assume that an economy is in the long-run equilibrium with the GDP deflator of 150 and potential output of $40 billion. Draw a typical aggregate demand-aggregate supply model using this information. Explain each curve/line.

a. The economy is experiencing a shock – a sharp drop of stock prices.

i. Show on the graph what happens in the short run. Explain.

ii. What type of output gap is this? Calculate the output gap.

b. Explain what will happen in the long run due to self-correction. Show the appropriate shift on the graph.

c. What problem is the economy facing?

d. The government decides to intervene. What policies should it implement? What is the goal of these policies?

e. What is the most challenging shock for the policy makers to deal with? Explain why.

Reference no: EM131380807

Questions Cloud

What are the fiscal policy instruments : What are the fiscal policy instruments? What are the fiscal policy types? Do you agree with the following statement: “Even if the Congress does not pass anynew laws to stimulate the economy, the fiscal policy is still facilitating the economicrecover..
How the self reference criterion might be manifested : Management at a U.S. company trying to market tomato paste in the Middle East did not know that, translated into Arabic, tomato paste is "tomato glue." How could they have known in time to avoid problems?
Which market structure you would prefer for selling products : ECO204- Describe which market structure you would prefer for selling products. Explain why and support your answer with the characteristics of that market.
Is this rule based policy pro-cyclical or counter cyclical : Below draw an AD/AS graph and a money market graph side-by-side. For the money market, use an upward sloping money supply curve and assume that the equilibrium interest rate in the money market is 5%. Then explain and show what happens if the Fed act..
Explain what will happen in long run due to self-correction : Assume that an economy is in the long-run equilibrium with the GDP deflator of 150 and potential output of $40 billion. Draw a typical aggregate demand-aggregate supply model using this information. Explain what will happen in the long run due to sel..
Are the differences cultural : Compare and contrast an international marketer's home pages for presentation and content;- for example, Coca-Cola and its Japanese version.-  Are the differences cultural?
How society manages its scarce resources and benefits : ECO/365- How society manages its scarce resources and benefits from economic interdependence. Why the demand curve slopes downward and the supply curve slopes upward.
Suppliers produce more goods-services when price increases : Phillip’s Curve: For each of the following draw an AD/AS diagram and a corresponding Phillip’s curve assuming the following: suppliers produce more goods and services when price increases; Show in both diagrams the effect of an increase in government..
Evaluate current global economic conditions : Evaluate current global economic conditions and their effect on local macroeconomic indicators in your selected country. Consider forecasts for population growth, GDP growth, GDP per capita growth, export growth, and sales growth.

Reviews

Write a Review

Business Economics Questions & Answers

  What is a monthly rent required to make this investment

What is a minimum monthly rent required to make this investment economically acceptable if the company's minimum attractive rate of return is 6% per year, compounded monthly?

  Monopoly and antitrust policy

Monopoly and Antitrust Policy. What is the difference between holding a monopoly and monopolization? Which is illegal? Explain.

  Compute average fixed cost average variable cost

Compute average fixed cost, average variable cost, and average total cost for each quantity. What is the efficient scale of the painting company.

  The patient protection and affordable care act limits

The Patient Protection and Affordable Care Act limits the extent to which insurers may consider age in establishing rates. The results are higher premiums for the younger insured and lower premiums for the older insured.

  Explain the law of diminishing marginal utility

Define marginal utility. Explain the law of diminishing marginal utility. Why is marginal utility more useful than total utility in consumer decision making?

  Vertically integrating its local broadcasting network

Show graphically, and with a few well-chosen sentences how a Major League Baseball team can help both itself and consumers by vertically integrating its local broadcasting network. You may assume that both the team and the broadcasting network start ..

  The expected rate of inflation

Elucidate how do your previous answers change in the special case where money demand does not depend on the expected rate of inflation

  What is the total benefit for the resident

A small Indiana town has one resident who uses and enjoys the local bowling alley. The marginal benefit of bowling for that resident is given by MB=50-6Q. The manager at the bowling alley has set the price of a game at $20. What is the total benefit ..

  What is social responsibility

What is social responsibility? How important it is toa customer and an employee?

  Think about economic behavior

To be successful leaders in the global business world of the 21st century, managers must consider economic trends, behavior, and ramifications of economic decisions. Managers must also balance the pressures to react in the short term and plan for the..

  If a nation exports few goods then it imports

If a nation exports few goods, then it imports, it

  Total effect of policies on real gross domestic product

In the early1980’s, to combat the recessionary forces, President Ron Reagan used expansionary fiscal policy by lowering (marginal) tax rates to combat the recession. Concurrently, Paul Volcker, Chairman of the Federal Reserve Board of Governors, redu..

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