Describe what would happen in the short run to prices

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The Future 2055 The U.S. economy is at full employment. President North West is spending billions of dollars on military equipment in the U.S. He is also attempting to carry out his promise to put a man on Mars by the end of the decade. He is considering increasing government spending by increasing the space programs budget to reach this goal. You are one of his advisors.

a. Using the AD/AS model graph the economy at full employment. Assume sticky wages.

b. Redrawing the graphs show the economic implications of increasing govern- ment spending on the space program.

c. With words describe what would happen in the short run to prices, output, the interest rate, and employment.

d. Recommend a policy that corrects any problems that spending on Mars mis- sions may be causing in the U.S. economy and show using graphs how this policy helps?

Reference no: EM13183338

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