Discuss about the shifting aggregate demand

Assignment Help Microeconomics

Reference no: EM131774716

Question: Assume the Australian economy is initially in a long run equilibrium, with real GDP equal to $1.5 trillion. Suppose, now, that there is a global stock market boom -- which enhances real wealth significantly, shifting aggregate demand (AD) to the right, and increasing real output, in the short run, by $60 billion. Assume LRAS does not shift over time. If neither the government nor the reserve bank change their policies in response to this shock, then, ceteris paribus, in the long run:

1. The economy would stay stuck, with GDP at $1.56 trillion.

2. The economy would recede because AD would automatically move back.

3. The economy would return to its initial equilibrium because the SRAS would move to the right.

4. The economy would return to its initial equilibrium because AD would move to the left.

5. None of the above.

Reference no: EM131774716

Questions Cloud

Calculated the cost of one widget manufactured for job : Calculated the cost of one widget manufactured for Job

How does increases real wealth significantly : Suppose, now, that there is a global stock market boom which increases real wealth significantly, shifting aggregate demand (AD) to the right, and increasing.

How many shares of stock were authorized : How many shares of stock were authorized, How many shares of stock were issued

Company faces when going into global market : What are a few ethical issues that a company faces when going into a global market?

Discuss about the shifting aggregate demand : Assume the Australian economy is initially in a long run equilibrium, with real GDP equal to $1.5 trillion.

Olliepods division sells children recreational shoes : The Olliepods division sells children's recreational shoes. The division's president is responsible for all short-run decisions on the manufacturing.

Discuss the ledger of duston company contains : The ledger of duston company contains the following balances: owner's capital $28900 owners drawing

What is beach taxable income : Beach Corporation, an accrual basis taxpayer, reports the following results for the current year: What is Beach's taxable income

Budget process in top-down or bottom-up : 1) Explain whether the company's budget process in top-down or bottom-up? 2) List two advantages and two disadvantages of using the approach that you selected.

User Account

All Pages