View the step-by-step solution to: 1. In the boom years of the late 1990s, it was often said that

1. In the boom years of the late 1990s,...
This question was answered on Mar 18, 2012. View the Answer
1. In the boom years of the late 1990s, it was often said that rapidly increasing stock prices were responsible for much of the rapid growth of real GDP. Explain how this could be true, using aggregate demand and aggregate supply analysis

2. Suppose you read in the newspaper that rising oil prices would contribute to a global recession. Use aggregate demand and supply analysis to explain how high oil prices could reduce real GDP
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Dear Student Please find attached solution of your assignment. Regards View the full answer

Economics-8029360.doc

Answer to Q1:
We know that,as price of stocks or bonds increases, rate of interest decreases in IS-LM model
and vice versa. Now, during recession, increases in stock price leads to excess demand in...

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