--%>
Assignment Help - homework help

Influence the economy in short run and long run

Illustrate how each of the following would influence the economy first in the short run & then in the long run. Suppose that Canada is primarily operating at its full employment level of output, which prices and wages are finally flexible upward and downward both, and that there is no counteracting fiscal or monetary policy.

a. Due to a war abroad, the oil supply to Canada is disrupted, sending oil prices rocketing upward.

b. Construction spending on new homes increase dramatically, greatly raising total Canadian investment spending.

c. Economic recession take place abroad, significantly decreasing foreign purchases of Canadian exports.

E

Expert

Verified

(a) Short run: The aggregate supply curve shifts towards the left, the price level increase, and real output declines. Long run: The aggregate supply curve shifts back rightward (because declining nominal wages), the price level drop, and real output raise.

(b) Short run: The aggregate demand curve shifts towards the right, and the price level and real output both enhance. Long run: The aggregate supply curve shifts towards the left (because of higher nominal wages), the price level increase, and real output declines.

(c) Short run: The aggregate demand curve shifts towards the left, the price level and real output both decline. Long run: The aggregate supply curve shifts towards the right, the price level drop further, and real output raise.

   Related Questions in Finance Basics

  • Q : None what are the disadvantages of

    what are the disadvantages of working capital

    		•
  • Q : What is Make-Buy Analysis Make-Buy

    Make-Buy Analysis: Business decision which compares the costs and advantages of manufacturing a product or product component alongside purchasing it. When the purchase price is high than what it would cost the manufacturer to prepare it, or when the m

    		•
  • Q : Which insurance company takes on the

    Which kind of insurance company usually takes on the greater risks: a life insurance company or a property and casualty insurance company? The risks sheltered against by property and casualty companies are much less predictable than are the risk

    		•
  • Q : Riskiness of portfolio with very low

    What happens to the riskiness of portfolio if assets along with very low correlations (even negative correlations) are combined? How successfully diversification decreases risk based on the degree of correlation among the two variables in questi

    		•
  • Q : Negative consequences of company

    Explain negative consequences of a company holding too much cash? A company holding too much cash would be giving up the chance to invest more in income generating assets

    		•
  • Q : What is Availability Period

    Availability Period: The time period throughout which an appropriation might be encumbered (that is, committed for expenditure), generally specified by the law making the appropriation. When no particular time is given in financial legislation, the pe

    		•
  • Q : How long do business cycles remain

    Normal 0 false false

  • Q : Define CALSTARS CALSTARS : The acronym

    CALSTARS: The acronym for the California State Accounting and Reporting System that is the state's primary accounting system. Most of the departments presently use CALSTARS.

    		•
  • Q : Order Quantity-Cycle Inventory-Safety

    Consider the following data pertaining to a distribution center.

    Q : Define Programs Programs : The

    Programs: The activities of an association grouped on the basis of common objectives. The programs are included of elements that can be further classified into tasks and components.

    		•