Assume the economy of the United States is currently experiencing a recession. A. Draw a correctly labeled graph of the long run aggregate supply, short run aggregate supply, and aggregate demand curves, and show each of the following: i. Current real output, labeled Y1, and current price level, labeled P1 ii. Full employment output, labeled Yf B. Identify 1 action the central bank could take to help the economy recover from their recession. C. Draw a correctly labeled graph of the money market and show the impact of the central bank's action identified in Part B on the nominal interest rate. D. On your graph in Part A, show the effect of the central bank's action identified in Part B on real output and price level. E. Assume there is an increase in business confidence as a result of the central bank's action. i. What will happen to the demand for capital goods? ii. Draw a correctly labeled graph of the loanable funds market and show the effect of the change identified in Part Ei on the real interest rate. F. Given your answer to Part E, what is the effect on potential real output in the long run? Explain.
Assume the economy of the United States is currently experiencing a recession.
A. Draw a correctly labeled graph of the long run
i. Current real output, labeled Y1, and current price level, labeled P1
ii. Full employment output, labeled Yf
B. Identify 1 action the central bank could take to help the economy recover from their recession.
C. Draw a correctly labeled graph of the
D. On your graph in Part A, show the effect of the central bank's action identified in Part B on real output and price level.
E. Assume there is an increase in business confidence as a result of the central bank's action.
i. What will happen to the demand for capital goods?
ii. Draw a correctly labeled graph of the loanable funds market and show the effect of the change identified in Part Ei on the real interest rate.
F. Given your answer to Part E, what is the effect on potential real output in the long run? Explain.
Note: Please answer E and F. Thank you
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