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:

Pluralistic Differentiation

The process of acknowledging and catering to a wide range of diversities within a society, implying an emphasis on inclusivity and respect for differences.

Structural Integration

The process of organizing the components of a system (e.g., an organization) so that they work together effectively.

Culture-Group Biases

The tendency to judge or interpret situations, behaviors, and individuals based on the norms and values of one's own cultural group.

Minority Cultures

Groups with distinct cultural, ethnic, or racial identities that are smaller or less dominant within a larger society.