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ECON105week4questions - (b Calculate the short-run...

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QUESTION 1 Imagine the economy is stable at its potential. Then a union gets higher wages for its workers. What are the economy's long-run options (solutions) in getting the economy back to its potential? QUESTION 2 An economy is in long-run equilibrium with an output of $400. Then there is an increase in investment of $50. The immediate effect is that equilibrium output becomes $550. The short-run effect is that equilibrium output becomes $500. (a) Calculate the simple multiplier.
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Unformatted text preview: (b) Calculate the short-run multiplier. (c) Give a long-run solution that will keep the price level low. QUESTION 3 An economy is initially at its potential. Then the marginal propensity to tax (t) falls. (a) Using an AD/AS/LRAS graph, show what happens immediately and in the short-run. (b) Comment on the economy's long-run options, and their advantages and disadvantages. ECON105 week 4 questions Eldar Sehic SFU 2010-1...
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