Assignment:
Question 1:
Look at the following table.
|
Item
|
Q1
|
P1
|
Q2
|
P2
|
|
Houses
Food
Games
|
2
50
10
|
100
2
5
|
3
40
20
|
90
3
5
|
Using Year 2 as the Index Year, calculate Yn1, Yn2, Yr1, Yr2 Then calculate P for both years, using the GDP deflator. What is the inflation rate from Year 1 to Year 2?
(Percentage change formula: Pold-Pnew/Pold )
Question 2: Use the same data from the table. Assuming no production of games, draw a linear Production Possibilities Frontier for Year 1 and Year 2 comparing Houses and Food. What is the (opportunity) cost of one house in Year 1? What is the (opportunity) cost of one unit of food in Year 2?
Question 3: Using the same data from the table, draw the Long-Run Aggregate Supply curve for Year 1 and Year 2. (You can use two graphs or one. Two might be easier.) Then draw the correct Aggregate Demand curve for both graphs, that will give the correct general price level P for both years. Did AS shift in or shift out in Year 2? Did AD shift in or shift out?
Question 4: Draw a LRAS curve for Year 2 again. Next draw an aggregate demand curve, and show the general price level P. Now draw a Short-Run Aggregate Supply curve that passes through the intersection of LRAS and AD. Suppose that the country prints a lot of new money in order to pay off its debts. What happens to AD? What happens to the general price level and output in the short run? What happens to to the general price level and output in the long run? Show the short-run and long-run equilibrium, and what happens to P and Y both in the short run and also in the long run.
Attachment:- Macro Unit.rar