Effects of various shocks and policy changes on an economy

Assignment Help Business Economics

Reference no: EM131162918

The AD/AS model is useful in predicting the effects of various shocks and policy changes on an economy. The model is based on goods and services being exchanged in well-functioning markets. In general, however, markets are not always perfect. Consider how the model would change as a result of market imperfections. (Hint: Can the AS/LRAS shift when there are governmental controls?)

A- How would the AD/AS model change if input prices, such as wages and raw material prices, were set by the government rather than in markets?

B- If the government sets input prices, what long-run effect would this have?

Reference no: EM131162918

Questions Cloud

The price of oil is determined by supply and demand : The price of oil is determined by supply and demand. The price of oil has been steadily hovering around the 100$-$120 per barrel mark for many years. Base on your understanding of the economic theory of supply and demand; describe why the price of oi..

Calculate the production and consumption of sugar : Under pressure from the sugar lobby, which feared a flood of sugar entering through Mexico, the U.S. Congress demanded limits on the amount of sugar that Mexico could export to the U.S. as a condition for passing the North American Free Trade Agreeme..

Understanding data is an important part of decision making : Analyzing and understanding data is an important part of decision making. Econometrics is defined as the statistical methods used to analyze data and make informed decisions. You are required to submit the selected data, methods for testing and valid..

Effects of various shocks and policy changes on an economy : The AD/AS model is useful in predicting the effects of various shocks and policy changes on an economy. The model is based on goods and services being exchanged in well-functioning markets. In general, however, markets are not always perfect. Conside..

Calculate the uniform annual cost : An alternative has a discounted project cost of $4,185,000 with no salvage value. The estimate was in constant year dollars and the discounting used mid-year factors. While the period of analysis is 5 years, the alternative only provides benefits for..

The upper big branch mining disaster : What could Massey Energy have done to avoid this tragedy? The company had a long history of being cited for safety violations. Why might a company persist with flouting violations? To what extent did Massey Energy’s organizational culture contribute ..

Explain how the determinant affects the demand for books : The determinants of demand and the demand for paperback books. For each of the following, state the determinant of demand that is changed, and explain how the determinant affects the demand for books.

Discuss the changes to the economy that the phillips curve : Using the AD/AS model, discuss the changes to the economy that the Phillips curve explains well, and describe under what conditions the Phillips curve fails to explain economic behavior. Include graphs of the Phillips curve and the AD/AS model in you..

User Account

All Pages