Assume the economy of Mongolia is in a long run equilibrium with full employment. a. Draw a correctly labeled graph of short run aggregate supply, long run aggregate supply, and aggregate demand. Show each of the following. Equilibrium output, labeled Y1. Equilibrium price level, labeled PL b. Assume there is an increase in consumer spending in Mongolia. On your graph in part A, show the effect this will have on the equilibrium in the short run, labeling the new equilibrium output and price level Y2 and PL2, respectively. c. What two fiscal policy options does the federal government have to fix the market imbalance? Explain how each would affect the economy.
Assume the economy of Mongolia is in a long run equilibrium with full employment. a. Draw a correctly labeled graph of short run aggregate supply, long run aggregate supply, and aggregate demand. Show each of the following. Equilibrium output, labeled Y1. Equilibrium price level, labeled PL b. Assume there is an increase in consumer spending in Mongolia. On your graph in part A, show the effect this will have on the equilibrium in the short run, labeling the new equilibrium output and price level Y2 and PL2, respectively. c. What two fiscal policy options does the federal government have to fix the market imbalance? Explain how each would affect the economy.
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
Section: Chapter Questions
Problem 10CQ
Related questions
Question
Assume the economy of Mongolia is in a long run equilibrium with full employment.
a. Draw a correctly labeled graph of short run
-
Equilibrium output, labeled Y1.
-
Equilibrium price level, labeled PL
b. Assume there is an increase in consumer spending in Mongolia. On your graph in part A, show the effect this will have on the equilibrium in the short run, labeling the new equilibrium output and price level Y2 and PL2, respectively.
c. What two fiscal policy options does the federal government have to fix the market imbalance? Explain how each would affect the economy.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Macroeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506756
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Macroeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506756
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning