09-03-2009 113346 PM

09-03-2009 113346 PM - will create< r c Describe the...

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Analytical Question I. The following diagram shows the AD, AS, and Y* curves for an economy. Suppose the economy begins at point A. Then government reduces its level of purchases (G). P | AS AD GDP a. Describe the short-run effects of this fiscal expansion. What will happen to the price level, and equilibrium GDP? Please draw on the diagram with corresponding changes. b. What kind of output gap it
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Unformatted text preview: will create? < r* c. Describe the automatic economic adjustment pfqcess^jjnd the new long-run equilibrium for the economy. Please draw on the diagram with corresponding changes. /)P- 6~f Z-f & 4 /!// \L (L d. Explain how the composition of real GDP has changed from the initial to the new long-run equilibrium....
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