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The University of Alabama Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the process by which each of the following government policies will move the economy from one long-run macroeconomic equilibrium to another. Illustrate with diagrams. In each case, what are the short-run and long-run effects on the aggregate price level and aggregate output? a. There is an increase in taxes on households. b. There is an increase in the quantity of money. c. There is an increase in government spending. In the long run, when the government pursues an accommodative policy, the output in the economy will be $80 billion and the price level will be $90 billion. Due to the increase in the prices of oil and consequently the increase in the cost of producing goods and services in the economy, the short-run aggregate supply curve shifts to the left. As a result, in the short run, the output is established at a level lower than the natural level of output. Now, the government pursues an accommodative policy in anticipation of the fall in output. As a result, the AD curve shifts to the right, and the long-run equilibrium is restored at the natural level of output but at a higher price level than before. To know more about the economy refer to the link: https://brainly.com/question/2421251 #SPJ4 Recommended textbook solutionsEssentials of Investments9th EditionAlan J. Marcus, Alex Kane, Zvi Bodie 689 solutions Century 21 Accounting: General Journal11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman 1,009 solutions
Fundamentals of Financial Management14th EditionEugene F. Brigham, Joel F Houston 845 solutions
Statistics for Business and Economics13th EditionDavid R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams 1,692 solutions What happens to the output of an economy in the long run?Rather, in the long-run, the output an economy can produce depends only on the resources and technology that the country has available. This is the idea embodied in the long-run aggregate supply curve (LRAS), which is vertical at the economy's potential output.
What will happen in the long run if the government adopts a policy to increase aggregate demand?If there is an increase in aggregate demand, the price level will go up. Once wages have adjusted to that inflation in the long run, SRAS decreases and returns the economy to full employment output.
How does an economy adjust to an increase in ad in the long run?An increase in consumer spending will cause the AD curve to increase. As a result, output increases and unemployment decreases. Unfortunately, this positive AD shock also means that inflation increases: An increase in AD leads to an increase in real GDP and the price level.
What causes the economy to move from its short run equilibrium to its long run equilibrium?What causes the economy to move from its short-run equilibrium to its long-run equilibrium? Nominal wages, prices, and perceptions adjust upward to this new price level.
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In the long-run, when the government pursues accommodative policy, the output in the economy will be
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