questions for exon 2

Econ 2 Homework Module 5 Name: Do the following 2 problems. You will want to use as your format the one I used in the diagrams I drew in lectures 5 and 6 for the cases of higher oil prices and government hiring. The textbook examples for the cases I worked are in figures 11.7 (b) and 11.8 (b). Our format is a little different from the textbook gures. The textbook diagrams start at the number 0 and goes to the number I. 1 nd it more intuitive to start with 1 (P1, Q1. AD 1. etc.) and go to the number 2. Please do that. The textbook uses the symbol Y rather than Q for the horizontal axis. Please use Q. The textbook has the LRAS curve on their diagrams. We will use that in the future. but not yet. It is not necessary to include it on these two problems. The textbook has the SRAS curve sloping up steeper as we move to greater quantities. As discussed in the lecture, this is correct, but it is not the point of what we are doing here, so you are free to use simple straight lines sloping up at around 45 degrees for the SRAS curve. None of the textbook's format choices are wrong, but we can be a bit simpler. Of course the problems you are working below will not be exactly like the videottext book examples referred to above since I did an increase in oil prices and an increase in AD, and you are doing a decrease in AD and a decrease in oil prices. 1. There is a decrease in AD. Show on an ADXAS diagram the effect on output and prices in the shortrun. State the effect on prices, output, unemployment, and wages next to the diagram. Your choices are rise, fall, or stay the same. 2. There is a decrease in the cost of an input into the production of many goods. Show on an ADJAS diagram the effect on Output and prices in the short-run. State the effect on prices, output, unemployment, and wages next to the diagram