Question
Hi there! I am really struggling to get by in AP Macro economics and I would really appreciate some help on this problem: The economy
Hi there! I am really struggling to get by in AP Macro economics and I would really appreciate some help on this problem:
The economy of Moneyland has an actual unemployment rate that is less than the natural unemployment rate.
(a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following.
(i) Current price level, labeledPL 1
(ii) Current real output, labeledY1
(iii) Full-employment output, labeledYF
(b) Suppose that investment spending on plant and equipment increases. On your graph in part (a), show the effect of the increase in investment spending on the equilibrium price level and real output in the short run.
(c) Identify one fiscal policy action the government of Moneyland can use to restore full employment.
(d) Assume instead that the government of Moneyland decides not to take any policy action. Will short-run aggregate supply increase, decrease, or stay the same in the long run? Explain.
Thank you so much!
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