A15 Supply Side Shock Assignment

A15 Supply Side Shock Assignment - and duplicate it and...

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A15 Supply Side Shock Assignment Consider an economy in an initial state depicted as point 0 in the graph below and answer the following questions. π y 1. Describe all the relations between actual and expected values of the main economic variables of concern that pertain to this state of the economy: For example, at point 0, Actual gdp or total economic output Y a = expected or potential output Y P . Now make the analogous comparison relations for the following variables: a. N ( employment) b. K U (Capacity Utilization of Capital) c. U ( Unemployment) d. π (Inflation) 2. On the graph below, show the effect of a supply side shock caused by an universal increase in the cost of energy for this economy. Decide which line is affected and select
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Unformatted text preview: and duplicate it and reposition the new line in it proper position that reflects its impact on the state of the economy from its initial state point 0. y 3. Now make the same type of comparison relations as made on (2) for the following variables: a. Y (gdp) b. N ( employment) c. K U (Capacity Utilization of Capital) d. U ( Unemployment) e. (Inflation) 4. Discuss how the economy will adjust in the long run if no policy is chosen to counter the effects of the supply side shock. 5. Choose a policy to implement as a corrective to the above shock and show the effects of this policy in the short run and in the long run....
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A15 Supply Side Shock Assignment - and duplicate it and...

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