Stimulate aggregate demand, Macroeconomics

Assignment Help:

The graph shows that if policymakers respond immediately to an oil price shock by stimulating aggregate demand, shifting AD to AD* then the level of output will remain constant. This is known as Accommodating Policies. The drawbacks of taking this approach are that the level of inflation would be higher. Therefore there exists a trade-off for policymakers. This trade-off is between the inflationary impact and the recessionary effects of a supply shock. In order to assist policymakers with their decision, the nature of the shock should be considered. If the shock were transitory, then stimulating aggregate demand could be used to avert a drop in output. If the shock were permanent, it is highly unlikely that aggregate demand policy would be able to prevent a drop in output.

1901_Review of related economic theory.png

Whilst this paper will be unable to analyse the success of the policymakers in the UK throughout the sample period, it is able to observe the effects that a shock in oil price would impact upon inflation and economic growth as these are two of the indicators which will be analysed.


Related Discussions:- Stimulate aggregate demand

Consumer surplus and producer surplus, Suppose the inverse demand curve for...

Suppose the inverse demand curve for a market is equal to p = 100 -- 0.3Q. The inverse market supply curve is p = 20 + 0.5Q. 1. Calculate the equilibrium price and quantity;

Equilibrium analysis, A vital question is whether the equilibrium we have i...

A vital question is whether the equilibrium we have identified in labor market (with a high unemployment rate) can remain in long run. Will there not be adjustments which will take

Aplia Assignment, Need answers for problems after chapters 10, 11 & 12 for ...

Need answers for problems after chapters 10, 11 & 12 for Macroeconomics in Aplia.com. Need today or tomorrow. Can you help?

Aplia, Hi, I need help with my Aplia macroeconomics problem sets.

Hi, I need help with my Aplia macroeconomics problem sets.

Create a gantt chart of online food store, In today's world when almost ev...

In today's world when almost everything has become easy with just a click on the mouse, even shopping for normal groceries has been revolutionized by making it online. The project

Production possibilities, you and your neighbor (n) consume without trading...

you and your neighbor (n) consume without trading. suppose you are initially consuming 7 bananas and 3 coconuts and your neighbor is initially consuming 6 bananas and8 coconuts. Yo

For high school graduates increase the wage, Arrow up or down: An increase ...

Arrow up or down: An increase in the wage for high school graduates __________ the opportunity cost of college. A) arrow up B) Arrow down

Determine the inflation rate in germany between 1992-2010, Inflation in Ger...

Inflation in Germany Once we have monthly data on a price index we can calculate inflation. In most nations, the percentage change in price index during one month is small. So,

Money demand function, Assume that the money demand function is (M/P) d = 2...

Assume that the money demand function is (M/P) d = 2,200 - 200r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is2. If the price level

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd