The Economy of Macroland Is Initially in Long-Run Equilibrium

question 21

Essay

The economy of Macroland is initially in long-run equilibrium. A severe drought causes an adverse supply shock.
a. What happens to prices and output in the short run?
b. What would happen to prices and output in the long run if there is no policy accommodation?
c. If the Central Bank of Macroland wants to prevent the short-run changes in price and output, what policy action could it take? How would the results of this policy action differ from the prices and output that would result in the long run with no policy action?

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Definitions:

Subordinate Feedback

Refers to the process where employees provide feedback, suggestions, or concerns upwards to their supervisors or managers.

Performance Appraisal

A systematic evaluation of an employee's job performance and productivity in relation to established criteria and objectives.

Employee Development

The combination of formal education, job experiences, relationships, and assessment of personality and abilities to help employees prepare for the future of their careers.

Behavioral Approaches

Strategies in psychology and management focusing on understanding and modifying individuals' actions in various settings.