Question
In the general election of 2019, one of the main political parties in the UK announced to build 100,000 houses a year if they were
In the general election of 2019, one of the main political parties in the UK announced to build 100,000 houses a year if they were elected. What would be the impact of this policy on the economy? In your report, you have to respond to the following criteria and make sure you adequately explain the transmission mechanisms and support your argument with diagrams [ Please label properly all diagrams]. (50 Marks) a) What happens when there is a positive shock to aggregate demand from a boom in the construction of new housing? b) Please show the impact on employment using the labour market model, what happens to the Philips curve and to inflation? c) What would you expect the central bank to do?
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