--%>
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 : Two Questions Question 1 An all equity

    Question 1 An all equity firm has a required return on its equity of 15%, has 10 million shares outstanding, and pays no taxes. The shares are currently trading at $6.00 each. The firm is planning to borrow $9 million at 5% interest rate and use the borrowed funds to buyback a portion of its equi

    		•
  • Q : Explain the term Continuous

    Continuous Appropriation: The constitutional or statutory expenses authorization that is renewed each year without additional legislative action. The amount obtainable might be particular, recurring sum each year; all or a specified part of the procee

    		•
  • 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 : What is Abatement Abatement : A

    Abatement: A decrease to an expense which has already been made. In state accounting, only specific kinds of receipts are accounted for as abatements, comprising refund of overpayment of salaries, rebates from vendors and third partie

    		•
  • 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 : Three examples of mutually exclusive

    Provide three examples of mutually exclusive projects. Mutually exclusive projects are projects which compete against each other for our selection. If firm were considering the purchase of new computer, requiring only one computer, then the pro

    		•
  • Q : Would there be positive interest rates

    Normal 0 false false

    		•
  • 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 : 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 : Multiplier effect Normal 0 false false

    Normal 0 false false

    		•