What are the long-run equilibrium p and y

Reference no: EM132716039

Question: Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0. The aggregate demand curve is Y = 3(M/P) and M = 1,000.

a. If the economy is initially in long-run equilibrium, what are the values of P and Y? Illustrate your answers in a diagram.

b. Now suppose a supply shock moves the short-run aggregate supply curve to P = 1.5. What are the new short-run P and Y? Illustrate your answers in a diagram?

c. If the aggregate demand curve and long-run aggregate supply curve are unchanged, what are the long-run equilibrium P and Y after the supply shock? Illustrate your answers in a diagram?

d. Suppose that after the supply shock the central bank wanted to hold output at its long-run level. What level of M would be required? If this level of M were maintained, what would be long-run equilibrium P and Y? Illustrate your answers in a diagram?

Reference no: EM132716039

Questions Cloud

Which statements regarding the installment sale of entire : Which statements regarding the installment sale of entire business is faults .the sale price and expense of sale of an entire business must be allocated because

What bases in the stock is : In 2017 he receive the return of capital distribution of 600 as a partial return on his investment in 2019 he sold his stock for 3,500. find bases in stock is

Explain long-run equilibrium p and y after the supply shock : If the aggregate demand curve and long-run aggregate supply curve are unchanged, what are the long-run equilibrium P and Y after the supply shock?

What is the depreciation expense for year two : Four years and a salvage value of $13000 was purchased for $77000. What is the depreciation expense for year 2 under straight-line depreciation?

What are the long-run equilibrium p and y : If the aggregate demand curve and long-run aggregate supply curve are unchanged, what are the long-run equilibrium P and Y after the supply shock?

Determine the interest and principal components of the loan : Calculate and compare the present values of the cash outflows associated with both the leasing and purchasing options. Show your work.

Calculate the npv for the ram electric acquisition : Calculate the NPV for the Ram Electric acquisition. All else being equal, would you recommend the acquisition of Ram Electric by Cavalier Electric? Explain

What is the connection between airasias intended strategy : What is the connection between AirAsia's intended strategy, formulated strategy and implemented strategy emanating from the vision and mission statements?

Prepare journal entries required to record the fair value : On May 15, 2020, Global Exports Ltd., Prepare the journal entries required to record the fair value hedge on the books of Global Exports Ltd

User Account

All Pages