Aggregate Demand And Supply: This Question Is Wo
Aggregate Demand And Aggregate Supply This Question Is Wo
Assume the U.S. economy is in long-run equilibrium. Analyze each of the following events independently and include answers to the following in your analysis: (1) Explain whether AD or SAS changes and why the change occurred. (2) Explain what happens to the equilibrium price level and equilibrium output in the U.S. in the short run. (3) Describe the type of gap facing the economy. (4) Draw a graph to illustrate your answer.
- a. The bubble in the housing market bursts, and prices of houses quickly begin to fall.
- b. With plenty of slack in the labor market, firms lower wages.
- c. Anticipating the possibility of war, the government increases its purchases of military equipment.
- d. Productivity in the U.S. continues to increase.
In addition, analyze the following scenario: Suppose the United States’ economy is in short run equilibrium producing RGDP equal to $150 billion. Potential GDP equals $250 billion. The marginal propensity to consume is 0.5.
(a) Draw a graph illustrating the U.S. economy and identify whether the economy faces a recessionary or inflationary gap. Discuss the problems associated with this gap.
(b) As an economic advisor, propose a fiscal policy to close the gap. Explain the rationale behind your policy choice and how it works. Include a graph illustrating your policy impact.
(c) Discuss potential long-term costs of implementing the fiscal policy you proposed.
(d) If the policy is not accepted by Congress, describe the self-correction mechanism by which the economy can return to long-run equilibrium, and illustrate it with a graph. Explain potential costs associated with this process.
Finally, describe the structure of the Federal Reserve System and compute relevant monetary aggregates based on given data for Turtleville. Also, solve differential equations and Laplace transforms as specified, and analyze the transfer functions of various systems and circuits, which are foundational in understanding control systems and signal processing.