--%>
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 : Standard deviation of the portfolio If

    If a stock with a standard deviation of 7% is combined with a stock that has a standard deviation of 5%, what will the standard deviation of the portfolio be? A) 6%B) Greater than 6%C) Less than 6%D) There is not

    		•
  • Q : Why do analysts compute financial ratios

    Why do analysts compute financial ratios? Ratios are comparative measures.  Since the ratio illustrates relative value, they let financial analysts to compare information which could not be compared in its raw form.  For instance, rati

    		•
  • Q : Question based on consolidated balance

    Normal 0 false false

    		•
  • Q : Determine the level of real output in

    Normal 0 false false

  • Q : What is Reverted Appropriation Reverted

    Reverted Appropriation: An appropriation which is reverted to its fund source after the date its liquidation period has terminated.

    		•
  • Q : Which ratios would banker is most

    Which ratios would banker is most interested while considering whether to approve an application for short-term business loan? Describe.Bankers and other lenders employ liquidity ratios to distinguish whether to extend short-term credit to a fir

    		•
  • Q : Finance associated to the fields of

    How is finance associated to the fields of economics and accounting?

    		•
  • Q : Define Allotment Allotment : The

    Allotment: The permitted division of an amount (generally of an appropriation) to be expended for a specific purpose throughout a particular time period. An allotment is usually authorized on line item expenditure basis by program or

    		•
  • Q : Describe utilization of a risk-adjusted

    Describe how utilizing a risk-adjusted discount rate develop capital budgeting decision making compared to utilizing a single discount rate for all projects? The risk-adjusted discount rate develop capital budgeting decision making compared to t

    		•
  • Q : What is State Operations State

    State Operations (SO): It is a character of expenditure symbolizing expenditures for the support of state government, exclusive of capital investments and expenses for the local assistance actions.

    		•