Illustrate what happens to economic output and inflation

Assignment Help Business Economics

Reference no: EM1349850

Suppose that the unemployment rate is at the natural rate of unemployment.

a. Use an AD-AS diagram to clearly and accurately show the economy's initial economic situation. This diagram should be drawn in BLACK.

b. Now suppose that in the first year there is a substantial increase in wealth and income inequality that leads to less work effort by the most productive members of a society. Assume that the effect on economic output from any changes in aggregate demand is greater than the effect on economic output from any changes in short-run aggregate supply. On your diagram above, clearly and accurately show the first year effects on this increase in wealth and income inequality on economic output and inflation. These changes should be drawn in RED.

c. Give an economic explanation of what you have shown in your diagram above. Be sure to discuss what happens to economic output and inflation and explain why these changes take place.

Reference no: EM1349850

Questions Cloud

What is the charge on each electrode : A worker on a scaffolding 65 ft above the ground needs to lift a 390 lb bucket of cement from the ground to a point 30 ft above the ground by pulling on the rope weighting 2 lb/ft . Set up the integral of how much work is required (just give the i..

Conflict management : Select an article, or a series of articles, from one or more newspapers or magazines from the past three months, and think about how the study of conflict management contributes to your understanding of current events such as the one you have sele..

Monitoring and managing the cash conversion cycle : Explain to management why monitoring and managing the cash conversion cycle is important to the overall profitability of the company.

How the study of conflict management contributes : How the study of conflict management contributes to understanding of current events

Illustrate what happens to economic output and inflation : illustrate what happens to economic output and inflation and explain why these changes take place.

What will be the frequency of vibrations : A proton collides elastically with a stationary deuteron. If the proton is deflected by 37 degrees, what fraction of its kineti energy does it transfer to the deuteron.

Calculate the corporate tax : The agency problem can seriously restrain the economic success of a corporation. What avenues are available to shareholders to bring their aims and those of organization into alignment?

Describe the different parts of the cia triad : Describe the different parts of the C.I.A. triad and how each can be used to improve the overall security of an information system.

Find the electron speed just before the electron strikes : In a television picture tube, electrons strike the screen after being accelerated from rest throughout a potential difference of 28000 V.

User Account

All Pages