--%>
Assignment Help - homework help

Short run and long run influence

Use graphical analysis to illustrate how each of the following would influence the economy first in the short run and then in the long run. Suppose that Canada is primarily operating at its full-employment level of output, that prices and wages are ultimately 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 rising total Canadian investment spending.

c. Economic recession takes place abroad, significantly dropping 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 reduces.  Long run:  The aggregate supply curve shifts back rightward (because of declining nominal wages), the price level drop, and real output enhance.

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

(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 enhance.

   Related Questions in Finance Basics

  • Q : Describe the role of a broker in

    Describe the role of a broker within security transactions? How are brokers compensated?Brokers handle orders to purchase or sell securities. Brokers are agents who work in support of an investor. While investors call with an order, brokers work

    		•
  • Q : Describe trustworthy collateral from

    Describe trustworthy collateral from the lenders' perspective? Describe whether accounts receivable and inventory are trustworthy collateral. Assets which are readily marketable, of stable value, and not likely to "disappear" make for trustwort

    		•
  • Q : Question on level of free market wage

    In the year of 1996, the U.S. Congress raised the minimum wage from $4.25 per hour to $5.15 per hour. Some of the people suggested that a government subsidy could help employers finance the higher wage. Assume the supply of low-skilled labour is specified by

    		•
  • Q : What is means of correlation

    What does this mean while we say that the correlation coefficient for two variables is -1? What does it mean if this value were zero? What does it mean if it were +1?Correlation is calculated by the correlation coefficient, represented through t

    		•
  • Q : Price The Audiology Department at

    The Audiology Department at Randall Clinic offers many services to the clinic’s patients. The three most common , along with cost and utilization data, are as follows: Service Variable cost per service Annual Direct Fixed cost Annual Number of Visits Basic Examination $5. $50,000 3,000 Advanced

    		•
  • Q : What is Amendment Amendment : A

    Amendment: A proposed or customary change to a bill in the Legislature, the California Constitution, acts passed by the Legislature, or ballot initiative.

    		•
  • Q : Health finance 7.2 The audiology

    7.2 The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Service Variable Cost Annual Direct Annual # Visits per Service Fixed Costs Basic exam $5 $50,000 3,000 Advanced examination $7 $

    		•
  • Q : Equilibrium GDP for the open economy

    Normal 0 false false

  • Q : Effect of foreign imports Normal 0

    Normal 0 false false

    		•
  • Q : How societys interests can affect

    Normal 0 false false

    		•