Question
An economy is described by the aggregate-demand curve Y=100-P and the short-run the aggregate-supply curve Y=-12.5+(1/2)P. a) If the economy is in long-run equilibrium, what
An economy is described by the aggregate-demand curve Y=100-P and the short-run the aggregate-supply curve Y=-12.5+(1/2)P.
a) If the economy is in long-run equilibrium, what are the long-run level of output and price level? (2 marks)
b) Suppose that a new tax on consumption is implemented, leading demand to shift by a factor of. Which direction do you expect the AD curve to shift? Through which of the channels discussed in lecture will we see this shift? (2 marks)
c)Suppose, (in other words, AD shifts by 33%). Calculate the new short-run equilibrium. (2 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started