Aggregate demand and aggregate supply analysis

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Reference no: EM13817117

Consider again the case of a country that suffers an Ebola epidemic that reduces the population by 20%. (a) Given your answer for problem 8 in problem set 1, draw the Aggregate Demand and Aggregate Supply analysis (in the usual output-inflation graph that we have used in class). Begin with the initial general equilibrium and walk through (i) the impact of the loss of life on LRAS, (ii) the subsequent changes in AS and corresponding short-run equilibrium and (iii) the nature of the general equilibrium to which the country will evolve. Label your graph carefully and completely. (b) In a brief narrative, discuss the graph you have drawn. Use equations where possible to explain why you drew the graph in the way that you did.

Reference no: EM13817117

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