Suppose the economy is in the Long Run Equilibrium. Rank the shocks to the economy from the most preferred to the least preferred and briefly explain the reasoning behind the ranking.

Task on aggregate demand/short run aggregate supply

Complete the assignment that consists of 3 parts.

1 – Analyze the following events and their initial impact on AD, SRAS, LRAS or both the SRAS and LRAS.
The government repairs aging roads and bridges. OPEC raises oil prices. The government raises unemployment benefits, which raises the natural rate of unemployment.

2- Short answer:

A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to
foreigners even though the U.S. aggregate price level stays the same. As a result, foreigners demand more
American aggregate output.

Your study partner says that this represents a movement down the aggregate demand curve because foreigners are demanding more in response to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve. Who is right? Explain.

3- Practice initial equilibrium and adjustment to new equilibrium

Suppose the economy is in the Long Run Equilibrium. Rank the shocks to the economy from the most
preferred to the least preferred and briefly explain the reasoning behind the ranking.

Notice that in the first part you need to choose only 3 options, and in the 2-nd and 3-rd per 1 option.

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