Describe the short-run and long-run effects on real output

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Describe the short-run and long-run effects on real output and the price level for each the following events. Assume the economy begins at short-run and long-run equilibrium. Justify your responses with reasoning.

1. Import prices suddenly rise.

2. Government institutes a significant reduction in taxes on production.

3. People hold off on spending because they expect prices to fall.

4. Government increases spending

Please answer the following questions:

1. Explain the two reasons that new growth theory treats investment in capital and investment in technology differently.

2. List five policies that encourage growth.

Reference no: EM13970395

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