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A16 Demand Side Shock Assignment.

A16 Demand Side Shock Assignment. - Now make comparisons...

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A16 Demand Side Shock Assignment Consider an economy in an initial state depicted by point 1 in the graph below and answer the following questions. π 1. On the graph above, show the effect of a Demand side shock caused by a financial crisis that decreases the supply of money for this economy. Select and duplicate the line affected and reposition the new line in it proper position that reflects its impact on the state of the economy from its initial state point 1. 2.
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Unformatted text preview: Now make comparisons for the relations for the following variables: a. Y (gdp) b. N ( employment) c. K U (Capacity Utilization of Capital) d. U ( Unemployment) e. π (Inflation) 3. Discuss how the economy will adjust in the long run if no policy is chosen to counter the effects of the demand side shock. π 4. 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. π...
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