Suppose the Economy Is Initially in Long-Run Equilibrium

question 42

Essay

Suppose the economy is initially in long-run equilibrium.For each of the shocks listed below,explain the short-run effects on output and the price level.
a.A stock market crash reduces consumers' wealth.
b.Businesses decide to hold larger inventories.
c.The government cuts defense spending.
d.Foreign countries buy more Canadian goods.

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Definitions:

Consumers' Needs

The essential desires or requirements that customers seek to fulfill with the purchase of goods or services.

Market Orientation

A business philosophy where the company prioritizes identifying and meeting the needs of its customers through its product mix.

Strategies

Plans of action designed to achieve long-term or overall goals and objectives.

Competitors

Other businesses or individuals that offer similar products or services and vie for the same target market's attention and resources.