1. The economy is in the short-run equilibrium, at the point given below: Price level = 130,...
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Question:
1. The economy is in the short-run equilibrium, at the point given
below: Price level = 130,
SR QD = 4 trillion
SR QS = 4 trillion
(LRAS = 4.3 trillion)
Consider Classical economy for this question. Using appropriate graphs, explain the impact of the economy in the long-run equilibrium.
2. a. Now consider Keynesian economy. Using details from Q (1), should the govt increase/decrease expenditure? By how much, given MPS = 0.4. (50-100 words)
b. Now consider, the presence of crowding out effect along with the effects from part (a). Using the information in part (a), what is your new answer. (50-100 words)
Related Book For
Macroeconomics
ISBN: 978-1319120054
3rd Canadian edition
Authors: Paul Krugman, Robin Wells , Iris Au , Jack Parkinson
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