In the below diagram assume that the aggregate demand curve shifts from AD1 in year 1 to AD2 in year 2,only to fall back to AD1 in year 3.
(a)Explain what will happen to the equilibrium price level and the equilibrium level of real GDP from year 1 to year 2.
(b)Locate the new position in year 3 on the assumption that prices and wages are completely flexible downward.Label this position,Pb and GDPb for the price level and real GDP respectively.
(c)Locate the new position in year 3 on the assumption that prices and wages are completely inflexible downward.Label this position,Pc and GDPc for the price level and real GDP respectively.
Definitions:
Hyperlink
An element in digital documents or web pages that links to other sections of the same document or to entirely different documents or web resources.
Insert Hyperlink Dialog Box
A pop-up interface within software applications that allows users to create a hyperlink by specifying the URL and text to display.
Link Button
An interactive element in digital documents and web pages that, when clicked, directs the user to another section of the document or a different webpage.
Remove Hyperlink
The action of deleting a link embedded in text or an object, disconnecting the reference to a web page or document.
Q8: The simple multiplier is defined as:<br>A) 1
Q49: Refer to the consumption schedules shown in
Q52: Which of the following best describes the
Q70: Refer to the above diagram,which applies to
Q95: If the MPS is only half as
Q143: Other things being equal,if the national incomes
Q149: An increase in the price level,other things
Q163: Discretionary fiscal policy will stabilize the economy
Q183: Refer to the above diagrams.Assuming a constant
Q184: Built-in stability is synonymous with discretionary fiscal