INDIVIDUAL ASSIGNMENT $9$

MACROECONOMICS

Due date: ${21}^{mt}$ of July $2024$ at $23$:$59$

Points: $5$ points

Considering our lesson on Aggregate Supply, graph the following lines:

a$)$ Long$-$Run Aggregate Supply Curve $($Natural level of output$)$

b$)$ "Theoretical"$/$Maximum Natural Output

c$)$ Short$-$Run Aggregate Supply Curve

d$)$ Explain the graph $-$ what does each curve mean $/$ imply?

Based on the same lesson show in a graph or explain in words how does the SRAS shifts if:

a$)$ The government offers subsidies for firms

b$)$ There is a decline in productivity

c$)$ Input prices go up

d$)$ The government increases taxes for businesses

e$)$ People and businesses expect a decline in inflation

Create a new graph and plot AD$,$ SRAS and LRE on Short$-$Run Equilibrium

a$)$ How do all these curves relate to each other? What do they mean?

b$)$ What could shift the AD curve?

c$)$ Explain the long$-$run self$-$adjustment mechanism. If an economy gets to long$-$run equilibrium due to self$-$adjustment, how would the graph change?

d$)$ What does equilibrium mean on the long$-$run and short$-$run?

If the self$-$adjustment mechanism doesn't work, what happens? Explain fiscal policy and its mechanism $-$ how does it work?