--%>
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 : What is Reference Code Reference Code :

    Reference Code: A three-digit code recognizing whether the item is from the Budget Act or some other source (example, legislation), and its character (example, state operations). This is the middle segment of the budget item or appropriation number.

    		•
  • Q : Define Senate Senate : The higher house

    Senate: The higher house of California’s Legislature comprising of 40 members. As an outcome of Proposition 140 (that is, 1990, term limits) and Proposition 28 (that is, 2012, limits on Legislators’ terms in office), members chosen in or a

    		•
  • Q : What is Working Capital and Revolving

    Working Capital and Revolving Fund: For legal base accounting purposes, fund categorization for funds employed to account for the transactions of self-supporting enterprises which render goods or services for a direct charge to the user that is genera

    		•
  • Q : Define Referendum Referendum: This is

    Referendum: This is the power of the electors to support or reject statutes or parts of statutes, with particular exceptions and meeting particular deadlines and number of voter’s signatures.

    		•
  • Q : Demand for French euros or a supply of

    Normal 0 false false

    		•
  • Q : What are a banks main reserves What are

    What are a bank's main reserves? Vault cash & deposits in the bank's account at the Fed are utilized to satisfy these reserve requirements; they are termed as primary reserves.  These primary reserves are non-interest-earning assets hel

    		•
  • Q : Define Revolving Fund Revolving Fund :

    Revolving Fund: Usually refers to a cash account termed as an office revolving fund (ORF). This is not a fund however an advance from an appropriation. The agencies might use the cash advance to pay out ORF checks for instant requirements, as specifie

    		•
  • Q : Define COBCP COBCP : Capital outlay

    COBCP: Capital outlay budgets are zero-based each and every year, thus, the department should submit a written capital outlay budget modify proposal for each fresh project or following phase of an existing project for which the department needs fundin

    		•
  • Q : Describe factors affecting minimum cash

    Describe the factors affecting the option of a minimum cash balance amount. The minimum cash balance amount is find out by how easy it is to increase funds when needed, how predictable the cash flows are, and how risk averse managers are.

    		•
  • Q : Explain computing of payback period How

    How do we compute the payback period for proposed capital budgeting project? What are the basic criticisms of the payback method? We compute the payback period for proposed project through adding a project's positive cash flows, one period at t

    		•