Aggregate demand-supply shocks and policy correction
Problem: Thinking of an incident that has impacted our economy, try to see if it affected aggregate demand or aggregate supply. Which of these curves shifted? How can this be corrected through Fiscal Policy, if needed?
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Explain the significance and implications of various economic theories pertaining to profit, consumer choice, demand and supply, forecasting and optimization.
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For each of the following, explain whether it shifts the short-run aggregate supply curve, the long-run aggregate supply curve, or the aggregate demand curve (or more than one of these).
Use an aggregate demand (AD) and aggregate supply (AS)model (short run model) to analyze this problem. Do not use a different model. Use AD & AS.
Suppose you earn $1,800 at the beginning of each month from your part-time job. Initially you cash your entire paycheck and spend your money evenly throughout the month. A. What are your average cash balances?
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Consider a macro model that has both a consumption function that depends on lagged income (Like Freidman's permanent income equation) and an investment equation that depends with a lag, on changes in income.
What is the expended change to gross product and the price level likely to be in the short run? How can this be illustrated by an aggregate demand and supply model?
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