Reference no: EM133128142

1) What are the four major steps on the growth diamond?

2) According to the quantity theory of money, how would a decrease in velocity affect AD?

3) If output is below the natural rate, explain why it would automatically fall through changes in the labor market.

4) Show the short-run effect of a currency depreciation on an AS-AD graph.

5) Show (and explain) the short- and long-run effects of a decrease in the money supply, on a graph of AS and AD, starting at the natural rate of output. Is money neutral?

6) Show an AS-AD graph where equilibrium output is above the natural rate. What could the Federal Reserve do to close the gap? Show the change on the graph.

7) Changes in what could affect the natural rate of output?

8) The 1990s saw high growth with low inflation. Give a possible explanation that would result in higher equilibrium output with a lower equilibrium price level on an AS-AD graph.

9) Farms of white farmers in Zimbabwe were recently confiscated. What does this suggest about Zimbabwe progress along the growth diamond?