After you have studied Economics in the News on pp. 258259, answer the following questions. a. What
Question:
After you have studied Economics in the News on pp. 258–259, answer the following questions.
a. What are the main features of the U.S. economy in the second quarter of 2014?
b. Did the United States have a recessionary gap or an inflationary gap in 2014? How do you know?
c. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that occurred in 2013 and 2014 that brought the economy to its situation in mid-2014.
d. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that will have occurred when full employment is restored.
e. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that would occur if the federal government increased its expenditure on goods and services or cut taxes by enough to restore full employment.
f. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that would occur if the economy moved into an inflationary gap. Show the short-run and the long-run effects.
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