Illustrate what impact will shift have on equilibrium gdp

Assignment Help Business Economics

Reference no: EM1371001

Q. 1. Explain why equilibrium level of national income is at point where
real expenditures curve crosses 45-degree line.

2. Draw a real expenditures curve on a graph Explain how a recessionary gap. Explain illustrate what happens to real GDP when it is initially to right of equilibrium point and why. Indicate two public policies that would be appropriate for addressing this situation. Explain their impact on your graph.

3. Draw a real expenditures curve on a graph Explain how an inflationary gap. Explain illustrate what happens to real GDP when it is initially too left of equilibrium point and why. Indicate two public policies that would be appropriate for addressing this situation. Explain their impact on your graph.

4. Using a simplified circular flow diagram (excluding government and net exports), explain why total expenditures can be greater or less than value of production. Explain how will producers respond to each of se situations and Explain how will their responses affect real GDP? Explain how can intended savings and intended investment differ, while actual saving and actual investment are always same?

5. Explain different conditions that can make aggregate supply curve shift to right. Explain how this shift on a graph. Illustrate what impact will shift have on equilibrium GDP?

6. Explain with aid of a graph why a "self-correcting" recessionary gap cannot be relied upon to bring an economy out of recession.

7. Illustrate what are problems that make fiscal policy difficult to use for stabilization purposes?

8. Giving examples of "supply-side" tax cuts, Explain how y are supposed to work and reasons for being sceptical about their usefulness. Draw a graph or graphs as part of your answer.

Reference no: EM1371001

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