Question: Section 2: Model Assumptions and Resultant Outcomes The 2 models you have used have different underlying assumptions. Outline the major underlying difference(s) between the two

Section 2: Model Assumptions and Resultant Outcomes

The 2 models you have used have different underlying assumptions.

Outline the major underlying difference(s) between the two models.

Briefly discuss and illustrate how thedifference(s) in the model assumptions impact the degreeof the potential impact on the economy. Use the AD-AS Model and provideONEdiagram to illustrate the potential difference in outcomes depending on the assumptions made. (Hint - consider the assumptions underlying the AE model - what SRAS curve reflects this?)

Section 2: Model Assumptions and Resultant Outcomes The 2 models you have

( AD - As Model with Labor Market Model Wage EI - - AP X Nat. Labor Outbut 7 x by AE Model with The labor Market model y y = AE Lage Expande. ture Not Labor

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