1. The economy of Wattsland has an actual unemployment rate that is less than the natural...
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1. The economy of Wattsland has an actual unemployment rate that is less than the natural unemployment rate. 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 Price Level, Labeled PL1 ii. Current real output, labeled Y1 iii. Full-employment output, labeled Yf b. Suppose that a foreign trading partner's economy enters a recession. On your graph in part (a), show the effect of the foreign trading partner's economy entering a recession on the equilibrium price level and real output in the short run. Identify one fiscal policy action the government of Wattsland can use to restore full employment c. d. Assume instead that they government of Wattsland decides not to take any policy action. Will short-run aggregate supply increase, decrease, or stay the same in the long run? Explain. 1. The economy of Wattsland has an actual unemployment rate that is less than the natural unemployment rate. 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 Price Level, Labeled PL1 ii. Current real output, labeled Y1 iii. Full-employment output, labeled Yf b. Suppose that a foreign trading partner's economy enters a recession. On your graph in part (a), show the effect of the foreign trading partner's economy entering a recession on the equilibrium price level and real output in the short run. Identify one fiscal policy action the government of Wattsland can use to restore full employment c. d. Assume instead that they government of Wattsland decides not to take any policy action. Will short-run aggregate supply increase, decrease, or stay the same in the long run? Explain.
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Here is the graph and analysis for the economy of Wattsland A graph with AS short run AS and AD curv... View the full answer
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