Briefly explain the business fluctuation

Reference no: EM131833194

Question: a. If long-run aggregate supply shocks do largely explain business fluctuation, while the aggregate demand curve mostly stays fixed, then should prices be higher than usual or lower than usual during a recession?

b. The following chart portrays historical U.S. data on the relationship between the price level and real GDP. If you take a look at the big swings in the 1970s and early 1980s, especially during recessions, do the data roughly suggest that long-run aggregate supply curve shocks or aggregate demand shocks were the primary disturbance?

Reference no: EM131833194

Questions Cloud

What should the bank do to the supply of reserves : Therefore, if a central bank chooses to start paying interest on reserves, but it wants M2 to remain unchanged, what should the bank do to the supply.

What happens if consumer and investor become more optimistic : The following diagram shows the economy growing at the potential growth rate with 10% inflation. Illustrate what happens if consumers and investors become.

Describing the rules and discretion : All of the following are called "rules." Which of the following so-called rules are actually like "rules" and which are more like "discretion"?

Define how an economy suffering from a recession : In the context of this chapter, identify what each of the following scenarios has in common and explain how they will affect an economy suffering.

Briefly explain the business fluctuation : If long-run aggregate supply shocks do largely explain business fluctuation, while the aggregate demand curve mostly stays fixed, then should prices be higher.

Explain the effect of the wage-channel : Do workers choose to work more because wages are temporarily high and do workers choose to work less because wages are temporarily low?

Examining the important drivers of business fluctuations : If aggregate demand shocks are the most important drivers of business fluctuations, then should we expect real wages to be procyclical.

Determining the inflation and real output growth : Often, more than one kind of shock hits the economy at once. When this happens, the different shocks could push inflation (or real growth).

Discuss about who inter temporally substitutes their labor : Do you know anyone who "inter temporally substitutes" their labor? In other words, what are some careers where someone might choose to work more during.

User Account

All Pages