Assignment 3 (3) - 1- ) The National Bureau of Economic...

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1- ) The National Bureau of Economic Research maintains a Web page devoted to business cycle expansions and contractions athttp://www.nber.org/cycles.html. Please take a look at this page to see if you can determine how the business cycle has been changing in recent decades. Has the overall length of cycles been changing? Have recessions been getting longer or shorter? The recession being getting longer as compared to previous recession, as due to the size of the economy, the effects of small recession are spreading across various sectors of the economy. 2- ) Please review the Summary of Commentary on Current Economic Conditions by Federal Reserve District (Beige Book), available through the Federal Reserve System at http://www.federalreserve.gov/FOMC/BeigeBook/2009/ Summarize the national economic conditions for the most recent period covered in the report. Overall, is the economy healthy? If not, what problems is it experiencing? I haven’t read the report, but as far as I know, the economy is not going through a healthy phase, as there is recessionary trend across the nation, layoffs, lower incomes, lower GDP and high national debt. 3- ) (Economic Fluctuations) Describe the various components of fluctuations in economy activity over time. Because economic activity fluctuates, how is long-term growth possible? ANS: The various reason for fluctuation in the economy can be due to fiscal policy, war, the collapse of the financial industry. Long term growth can be achieved by increasing the education of the labor force, increasing productivity, attracting foreign investment, improved technology and improving overall efficiency. 4- ) (Aggregate Demand and Supply) Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and in which direction? What happens to aggregate output and the price level in each case? Brielfy explain. a. The price level changes Price level changes causes movement along the curve, it doesn’t shift the curve. It decreases the aggregate output. b. Consumer confidence declines c. The supply of resources increases d. The wage rate increases ANS: A. The price level changes (they both shift)
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Price level changes are movements along the curves - they do not shift the curves. (Price may have changed because of a shift, but that is another issue). B. Consumer confidence declines (neither) With declining consumer confidence, people are "leery" about the future, they buy less especially big-ticket items. Aggregate demand shifts inward (left). C. The supply of resources increases - aggregate supply curve shifts to the right
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Assignment 3 (3) - 1- ) The National Bureau of Economic...

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