A) Using the AS - AD model illustrate the COVID 19 recessionary gap assuming it was caused by a "supply shock." B) B) Using the AS - AD model illustrate the COVID 19 recessionary gap assuming it was caused by "demand shock."
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- Draw and fully label an AD-AS model. Describe the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve in words. Why is one of these curves horizontal and the other vertical?a) In the AS/AD macro model, starting at potential GDP explain what happens in the short run when there is an exogenous increase in government consumption spending.b) What happens in the long run?c) What would be different in the short run and the long run if the initial shock had been an exogenous increase in energy prices?d) How would the answer to a) and b) have been different if the economy had started with excess capacity (and a horizontal short-run aggregate supply curve)?e) What is meant by “the GDP gap”?Explain with the aid of a diagram An increase in the price of oil is an example of a negative supply shock. Use the AD-AS model graph to explain the effect of a negative supply shock on the price levels and output levels in the economy.
- Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of a decrease in government spending and an increase in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis.Assume that an economy is initially operating at the natural rate of output(full employment output). Use the AD-AS model to illustrate graphically the effect on price and output of an increase in government spending and a decrease in the cash rate . Explain your assumptions with respect to the range of aggregate supply of your analysis.Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of a increase in government spending and an increase in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis.
- Consider the AD-AS model below. The economy is in long-run equilibrium at point in period 1. Consider an increase in government spending. If the public has rational expectations, the economy will move to point If the public has adaptive expectations, the economy will move to point . In period 3 the AS will pass through point In the long run the AS will move to pointIn Figure 1 above,how does the AD-AS model reflect the idea that governments cannot increase real GDP beyond an economy’s equilibrium level that the free-market economy is able to produce? Explain your answer. 2.1. In Figure 2 above, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation, and recession? 2.2. Define and describe: the aggregate supply (AS) curve in the immediate short run. the aggregate supply (AS) curve in the short run. the aggregate supply (AS) in the long run. 3. Listen: Podcast: The Economics of Fiscal Stimulus - Econ EveryDay The Covid-19 pandemic shifted the aggregate supply and aggregate demand curves to the left. Did that increase or decrease real GDP, employment, and inflation rate? Explain your answer.The Treasury notes that there are several ‘risks’ to its predictions. These include that “ The potential for an extended conflict in the Ukraine ... has increased the risk of supply disruptions, pushing up and increasing volatility in energy, agricultural and metals prices..... A prolonged conflict will increase the risks associated with the negative terms of trade and confidence shocks for these countries” Using the dynamic AD/AS model, illustrate and explain how an extended conflict in the Ukraine would impact on the Australian economy. Be sure to discuss the pathways by which this conflict may impact on the domestic Australian economy. Hint: Start from diagram representing the current position of the economy and then illustrate what happens, consistent with your argument, showing both short run and long run effects. The majority of the marks for this question depend on what you write.
- Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then: a-long-run aggregate supply will decrease. b-aggregate demand will decrease. c-aggregate demand will increase. d-long-run aggregate supply will increase.Assume that the United States' macroeconomic equilibrium is equal to the potential GDP. Americans are becoming more cautious with their household spending due to the uncertainty of the presidency of Donald Trump. Using the AD-AS model, explain carefully the immediate and long-term effects of the event on the economy. Draw the appropriate AD-AS diagram to support your explanation.Two potential causes of inflation above target in the AD-AS model: Demand-pull inflation: This occurs when aggregate demand (AD) increases more than the long-run aggregate supply (LRAS). In the AD-AS diagram, this would be represented by a rightward shift of the AD curve. The result is a higher price level and real GDP beyond the long-run macroeconomic equilibrium level. Cost-push inflation: This occurs when the short-run aggregate supply (SRAS) curve shifts to the left due to increased production costs, such as rising wages or input prices. In the AD-AS diagram, this would be represented by a leftward shift of the SRAS curve. The result is a higher price level and a reduction in real GDP. how do i graph this information in an ad-as diagram