Question: (c) Suppose an economy is experiencing a decrease in aggregate demand. Discuss the automatic process that will bring this economy back to the long-run equilibrium

(c) Suppose an economy is experiencing a decrease in aggregate demand. Discuss the automatic process that will bring this economy back to the long-run equilibrium in the absence of the government intervention. What role, if any, does "wage stickiness" play in this process? (6 marks)

could you show me the response to this question which will get full marks. thank you.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Part B Question 1 (a) Give definitions of the short-run (SRAS) and long-run (LRAS) aggregate supply curves. (2 marks) (b) Explain how each of the following events would affect the LRAS curve. (4...

Suppose an economy is experiencing a decrease in aggregate demand. Discuss the automatic process that will bring this economy back to the long-run equilibrium in the absence of the government...

Suppose an economy is experiencing a decrease in aggregate demand. Discuss the automatic process that will bring this economy back to long run equlibrium in the absence of government intervvention....

Final_Exam_Macro Question 1 (2 points) Purchasing-power panty theory does not hold at all times because many goods are not easily transported and the same goods produced in different countries may be...

1 5 pts Index funds Group of answer choices promise to beat the market provide a return that is in line with the CPI mimic a stock index and generally outcompete actively managed funds actively pick...

carefully consider answering all the questions with good diagrams where applicable In this activity we study the topic of Franchising and explore it as an opportunity for business growth (franchisor)...

Explain the following statements. Que 1. 1. John just bought shares of stock in IBM for $10,000 and paid a $90 commission to his broker. How did this affect GDP? A) It had no impact on GDP. B) GDP...

Question one. 1. The following table shows the quantities of corn supplied and demanded at different prices. Price per Ton Quantity Supplied Quantity Demanded $80 700 1,200 85 800 1,100 90 900 900 95...

3. Frank, age 70, is receiving a Social Security retirement check of $580. His wife, who is 67, also receives a check off of his record. They also receive a small dividend of $70 each month. (20...

A company has estimated that issuing a senior, unsecured bond in the market will require the company to pay a 7% interest rate to investors to compensate for the risk of default. The company is rated...

A 99% confidence interval estimate can be interpreted to mean that: (a) If all possible samples are taken and confidence interval estimates are developed, 99% of them would include the true...

Bob and Carlotta are welders working for two different divisions of the same company. Both have the same level of experience. However, Bob earns more than Carlotta. Under the Fair Labor Standards Act...

7. Fill out the form below. Only the most important roles and your basic values are to be filled.

10. Try to remember the last communication you entered into. How many times did you fill in information that the other person did not convey? How many times did you speak before the other person...

6. Think of a situation where you noticed that the other person or people did not like or understand your behaviour. Examine your own intentions behind the behaviour.