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What are the four phases of the business cycle

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Assignment

Overview:

Answer the following questions. Use the rubric below to prepare your paper.

Questions:

1. Contrast the ideas of nominal and real GDP. Why is one more reliable than the other for comparing changes in the standard of living over a series of years? Use the concept of real and nominal GDP to compare the years 1980 and 2015. Which year was a better year for the economy and why?

2. What are the 4 phases of the business cycle? How long does a business cycle last? What causes each phase?

3. How does the size of the multiplier relate to the size of the marginal propensity to consume? Does this relationship have any relationship to economic policy?

4. Draw the aggregate demand and aggregate supply graphs in a three-panel model: In the first graph, show aggregate demand on the graph and aggregate supply in the immediate short run. In the second graph, again show aggregate demand, but this time show aggregate supply in the short run. Finally, in the last panel, show aggregate demand and aggregate supply in the long-run. Be sure to label each axis and each curve in each graph.

Discuss the following by referring to your graphs: 1) What are the determinants of aggregate demand and aggregate supply? 2) Why do the aggregate demand, aggregate supply (immediate short run), aggregate supply (short run), and aggregate supply (long-run)curves slope the way they do? Finally answer the question: What is the overall point that the graph model explains.

Reference no: EM131744515

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